Because Azeri Light is a higher quality crude (lighter and sulfur-free) than Brent, it typically sells for $2-4 more on global markets.
Yeniavaz.com reports that a sharp difference between the prices of Azeri Light and Brent has been observed in recent days.
In fact, today, April 3, this difference has reached $30. Thus, while Brent crude is selling for $110, the price of Azeri Light has risen to $140.
For reference, Azerbaijani oil is primarily exported to the Mediterranean Sea (Port of Ceyhan) via the Baku-Tbilisi-Ceyhan pipeline. As risks emerging in the Persian Gulf and the Strait of Hormuz threaten oil supplies from the region, demand for "safe" Azerbaijani crude, which can be immediately loaded in the Mediterranean, has surged.
Furthermore, Azeri Light crude can be used to produce high-quality diesel fuel and gasoline. Refineries in Europe and some other regions are currently facing severe fuel shortages. Because Azerbaijani crude produces more cost-effective fuel with lower energy consumption than Brent crude, refineries are willing to pay a premium to purchase it.
As we have already noted, in normal times, the difference between Brent and Azeri Light crude prices is small.
However, due to the current conflict in the Middle East, tanker rental rates have increased three- to fourfold. Since Azeri Light is sold on a "delivered within" (CIF) basis, insurance and transportation costs are automatically added to its sale price. Since Brent crude is sold on a free-on-board (FOB) basis, these transportation costs are not reflected in its price.
Insurance rates for vessels transporting oil to war zones and tension zones have also risen sharply. Since the CIF price includes insurance, this increase pushes the final selling price of Azerbaijani crude above the price of Brent.
Elnur Ali
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