LONDON: Egypt’s currency crisis has intensified its oil supply troubles, as the weaker pound makes it more difficult for cash-strapped Cairo to buy vital crude for its refineries.
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 a tender, traders said. That tender was already considered insufficient to supply Egypt’s refineries, even at reduced running rates. EGPC officials could not be reached for comment. Egypt subsidises 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, its December deliveries will arrive late.
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 December 24, as seen on Reuters AIS Live ship tracking, after loading crude in Oman. “J P Morgan’s vessel has been waiting for more than two weeks,” one seller said. “No letter of credit.”
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. Demand for refined oil products such as petrol and diesel is rising due to population growth.
Reuters
