Outages from Russia to North Sea give physical crude a boost

* Sanctions on Iran, tainted Russian oil hit supplies
* Strong demand adding to impact of tight supply-JBC
* European physical market scrambles for barrels-UBS

By Alex Lawler and Noah Browning
LONDON, May 13 (Reuters) - Crude oil markets in Europe and
West Africa are gaining support from unplanned Russian, Iranian
and North Sea supply losses, and analysts say Brent futures have
yet to fully reflect this.
Nigeria's biggest crude grade, Qua Iboe, was being offered
at a $2.50 a barrel premium to benchmark dated Brent, the
highest since 2014. CRU/WAF In the North Sea, Forties crude
reached a six-week high on Friday. CRU/E
The strength reflects a drop in supply from Iran in May
after the United States tightened the screw on Tehran's main
source of income with sanctions. Russian output has fallen due
to contaminated crude and North Sea and African supplies are
also down because of field maintenance and outages.
Despite physical crude supply losses, Brent futures LCOc1 ,
which are underpinned by Forties and four other North Sea
crudes, are trading at about $72 a barrel, down from a 2019 high
of $75.60 reached last month.
"The physical market in Europe is scrambling to obtain
sufficient barrels," said Giovanni Staunovo, an analyst at UBS.
"We expect the tightness in the physical market to impact
the financial market, and see Brent rising to $75 over the
coming weeks," he added.
Oil traders also said the outright, or flat, price of Brent
was low given outages affecting crude priced against Brent,
namely Russian Urals, the North Sea Oseberg and Ekofisk grades,
Nigerian Bonny Light and some Angolan crudes.
"I am surprised the flat price isn't higher," said a North
Sea crude trader. "But it might be reflecting people's
expectations that the Saudis will step in to provide more
barrels."
Top exporter Saudi Arabia has met requests from some buyers
that previously had waivers from U.S. sanctions against
purchases of Iranian crude, but it is reluctant to boost supply
and risk a price crash. SUPPORTIVE ELEMENTS
Besides supply losses, strong demand from refiners is also
providing support for the physical market.
"There are several supportive elements coinciding," said
David Reid of JBC Energy in Vienna. "We have refining intake of
close to 84 million barrels per day (bpd) over July and August,
which is about 2.5 million bpd above our March estimate."
Against that backdrop, European interest in West African
crude is high, traders said.
"The market is tight and the market is for sellers with the
right cargo and selling on time," said one European trader.
Still, oil from Nigeria and Angola is being pulled away from
Europe due to high U.S. demand as the summer driving season
kicks in, as well as demand in Asia where Indian and Chinese
state companies were looking to replace Iranian barrels.
With those markets more willing to meet higher price offers,
Europe was also seeking supply closer to home, such as from the
Mediterranean and Russia, said another European trader.
Two Nigerian crude streams are under force majeure - a
clause allowing a seller to miss deliveries due to unforeseen
circumstances. A third outage this year on Royal Dutch Shell's
Nembe Creek Trunkline has pushed back loading of Bonny Light
crude by at least five days.
Oilfield maintenance in Angola has made for a relatively
small June export programme, adding to tightness in heavier
grades. Dalia, a heavy crude, has been selling at a premium of
$2.00 to dated Brent, rather than the more typical discount.
"There's not a plethora of oil out there, especially heavy
oil," another trader said. "There's certainly not a huge amount
in East Asia and in the West, too, and demand is high."

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(Editing by Edmund Blair)