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North Sea Forties crude oil falls to three-month low on growing supply

The Forties crude premium to benchmark Dated Brent fell to its lowest level in more than three months Wednesday, pressurized by growing supply from the North Sea and Libya, and declining refining margins, said traders.

The grade was assessed at a discount to Dated Brent of $0.26/barrel, down $0.04/b from Tuesday and its lowest level since August 8.

Traders said gasoil and diesel crack spreads -- the relative values of the product to crude -- had continued to worsen due to falling water levels on the river Rhine, which have been preventing barges laden with products from the Amsterdam-Rotterdam-Antwerp hub reaching Germany, Europe's main demand center.

This weakening of gasoil and diesel cracks -- the main products boosting the refining complex in winter -- has been incentivizing refineries situated in Northwest Europe to either maintain or cut runs.

The falls come against a background of poor refining margins, with naphtha cracks recently falling behind fuel oil values in Europe. Naphtha is a light oil product and usually trades at a premium to heavier fuel oil.

In addition, expectations about rising supply from the North Sea and Libya in December has given refiners plenty of options, and meant they have dumped grades such as Forties and Ekofisk in favor of Norwegian Oseberg or sour grades like Russian Urals, which yield larger volumes of gasoil and diesel.

"[It] all has a quite depressed feel to it all...refiners finally have plenty of options," said a trader.

The spread between Forties and Urals FOB Primorsk was assessed at $0.537/b Wednesday, its lowest level since May 2009.

Output from the four grades that make up the North Sea Dated Brent benchmark -- Brent, Forties, Oseberg and Ekofisk -- is forecast to reach 1.1 million b/d in November and December, up around 200,000 b/d from the summer.

Production from Libya, meanwhile, is growing at a rapid pace following the fall of the Qadhafi regime.

In December, Libya's National Oil Company expects crude exports to rise to 9 million barrels (290,000 b/d), up from almost nothing in August.

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