Egyptian currency crisis hits oil supply

LONDON - Reuters

An unidentified woman walks past a currency exhange office in Cairo. EGPC, the state-runner oil company, is also effected by Egyptian pound’s free fall.

Egypt’s currency crisis has intensified its oil supply troubles for cash-strapped Cairo to buy vital crude for its refineries, as state-owned Egyptian General Petroleum Corporation (EGPC) has only purchased 3 million barrels of crude oil for the first quarter of this year, half of what it was seeking in tender, traders said Jan. 8.

That tender was already considered insufficient to supply Egypt’s refineries, even at reduced running rates.

“Of course it’s not enough, they need more - but no money,” a trader, active in the East Mediterranean oil market said.

EGPC officials have not made any comment, while Egypt subsidizes fuel costs heavily, spending around a fifth of its GDP on making fuel more affordable to the population.

EGPC has been trying to mitigate the cost of subsidies by buying more refined oil products instead of expensive crude oil feedstock, but is hard pressed to meet its needs. Egypt has not bought any crude for January and on top of this, due to its late December deliveries. J.P. Morgan sold 2 million barrels to EGPC via its fourth quarter tender but the company has yet to complete the delivery, the trader said.
The B. Elephant tanker has been waiting to discharge in the Red Sea since Dec. 24, as seen on Reuters AIS Live ship tracking, after loading crude in Oman.

‘No letter of credit’

Egypt’s state oil company has found it increasingly difficult to procure letters of credit for its transactions and costs are rocketing. A seller said J.P. Morgan’s vessel had been waiting for more than two weeks, adding that there was no letter of credit.

Several times in 2012, tankers carrying vital oil products piled up outside ports when these letters were delayed, which led to gasoline shortages and protests.

In the latest tender, trading company Petraco will deliver 2 million barrels of Iraqi Basra Light in February, several traders said. International trader Arcadia will deliver a 1 million barrel cargo of the same grade in March. Egypt already pays hefty premiums for its fuel deliveries to cover sellers’ rising costs for dealing with it. Currency devaluation is amplifying the situation as it makes buying crude oil priced in dollars even more expensive.

The Egyptian pound has lost more than a tenth of its value, since the 2011 revolution and 4.6 percent of its value since end December alone.