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Qatar, trading houses doing oil deals with Libya

MYT 5:15:12 AM

DOHA/LONDON (Reuters) - Qatar confirmed on Tuesday it was marketing Libyan crude oil and buying fuel on behalf of the rebels trying to overthrow Muammar Gaddafi, throwing a vital lifeline to the embattled anti-government forces.

A fuel pump is defaced with a graffiti caricature of Muammar Gaddafi in Ajdabiyah March 31, 2011. (REUTERS/Finbarr O'Reilly)

The United States endorsed the Qatari action and oil traders said the recent resumption of the Libyan oil trade by specialist commodities trading houses had been enabled by Western political support.

OPEC member Qatar, a tiny but hugely wealthy monarchy, has already sold 1 million barrels of crude for the rebels and shipped four tankers full of gasoline, diesel and other refined fuels to their stronghold of Benghazi in eastern Libya, according to a statement carried by its official news agency.

"The step ... comes within the context of resolutions taken by the participating countries in the London conference on Libya held on March 29th," Qatar's QNA news agency said.

The resumption of oil exports will boost rebel fortunes amid heavy fighting with forces loyal to Gaddafi and demands from France that Western allies do more to protect Libyan civilians.

Qatar has been the Arab nation most staunchly supportive of the Libyan rebels and the NATO-led effort to stop Gaddafi's forces from attacking civilians, a position that has put it at odds with some other members of OPEC, including Iran and Venezuela.

U.S. State Department spokesman Mark Toner told reporters at his daily briefing that Qatar's actions were supported by Washington.

The United States and other members of the Libya contact group are due to meet on Wednesday in the Qatari capital of Doha to review the situation in Libya.

TRAFIGURA AND VITOL

Oil traders told Reuters on Tuesday trade house Trafigura planned to export a cargo of Libyan oil from the port of Brega and Vitol had shipped a gasoline cargo into rebel-held Benghazi.

Vitol and Trafigura declined to comment. It was unclear if Qatar had a role in either transaction.

If placed, the Trafigura cargo would be only the second oil shipment to leave Libya after Vitol shipped a cargo to China last week.

"It raises the question of whether the crude we saw being taken by tanker last week was initially marketed by the Qataris," said Sam Ciszuk, analyst at IHS Insight in London.

"Using the Qataris as the middlemen would shield Vitol from the political and legal risk, which is considerable."

Oil traders expect the trading houses, known for their vast contacts and willingness to operate where major oil firms will not go, to dominate the risky trade with the rebels for the foreseeable future.

Libyan oil exports were halted from early March due to low field production and as oil firms balked at international sanctions and security concerns.

Vitol shipped a cargo of gasoline to the rebel-held port of Benghazi in recent days, shipping sources said on Tuesday, providing rebels with much-needed fuels to continue their war effort. The cargo was shipped from Malta to Benghazi and the oil tanker was fixed last week, the sources said.

A trade source said Vitol was in talks with the rebels to supply them with steady flows of gasoline and was in the process of "working out a deal for the payments."

PRIVATE TRADE HOUSES DOMINATE

Traders said they were not surprised that the first Libyan deals had been done by private trading houses, which take greater risks than the listed U.S. and European oil companies which were the biggest buyers of pre-war Libyan oil.

"It does look very much like good old Marc Rich," a veteran oil trader in the Mediterranean said.

The dominant force of oil trading in the 1970s and 1980s, Rich is still admired in the trading community despite controversy arising from his trade with countries under sanctions, such as Iran, and a U.S. tax evasion case.

With Libya, the situation is inverted: instead of risking sanctions by trading with Gaddafi's regime, the companies are taking the physical and financial risk of trading with an unofficial rebel group. Rather than face global condemnation, they're effectively supporting a global goal.

As Glencore, the company that evolved from Rich's trading house, prepares for a public share offering, its arch-rivals Vitol and Trafigura are the leading risk takers.

"After the IPO, Glencore would become more of a banal public company. Vitol will keep this 'walking on the knife edge' approach," one trader said.

Unlike Glencore, most other traders plan to remain privately held partnerships, which many observers say will keep risk appetite high.

Libya's government has been on the U.S., EU and U.N sanctions lists since March. Although rebels have been unofficially excluded from them, oil majors say it will take a long time before they can start buying oil.

"It is simply nonexistent for me at the moment. Even if I'm told that it is definitely not part of the sanctions, I will need to see dozens of things change both inside and outside my company so I can start looking at it again," said a trader with a Western major.

Trading sources told Reuters Trafigura had contacted at least two oil firms to offer a Sarir grade crude sourced from eastern Libya and shipped from Brega.

Brega was previously rebel-held but has been close to the scene of fighting between rebels and forces loyal to Gaddafi.

(Additional reporting by Jessica Donati, Amena Bakr and Dmitry Zhdannikov, Arshad Mohammed and Robert Campbell; writing by Dmitry Zhdannikov and Robert Campbell, editing by William Hardy, James Jukwey and Jim Marshall)

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