Oil markets in September 2004 faced an unusual split: ample crude was available, but not the kind most refineries could use. OPEC members insisted there was no supply shortage, pointing to plentiful heavy, sulphur-rich crude from Gulf producers and Venezuela. Prices told a different story, with New York benchmark oil topping $50 a barrel.
The problem was structural. Most refineries are built to process light, low-sulphur crude, which yields petrol, gasoil, and heating oil more cheaply. Heavy sour crude demands costlier processing, and many facilities lack the equipment for it entirely.
Nigeria, the UAE, Angola, and Libya produce the lighter grades refiners prefer; Saudi Arabia, Kuwait, Iran, and Venezuela pump the heavier surplus grades. Riyadh was offering discounts on its heavy crude in the American market, but buyers showed little interest. Saudi Arabia's newly announced 1.5-million-barrel capacity addition was largely of Arabian Light Crude, a grade that is light but still sulphur-rich.
Two events tightened the light-crude squeeze. Gulf of Mexico hurricanes shuttered US refineries built to handle heavy Venezuelan crude, while unrest in Nigeria rattled markets because the country is a leading supplier of low-sulphur oil to the United States. European refineries sourced roughly half their inputs from light grades; China ran 80 percent of its refinery throughput on light crude, against 34 percent in the United States.
Historical summary. TurkishPress restated this AFP wire report, first published in September 2004, in its own words.