The prices of three major Nigerian crude oil grades fell last month on the back of soft demand from Asian refiners, particularly in China, the availability of prompt unsold cargoes, and the steady flow of light sweet crude from the United States to Europe.
The Organization of the Petroleum Exporting Countries (OPEC) disclosed this in a new report.
OPEC said the crude market’s soft fundamentals were reflected in the decline of many regional crude oil differentials, including in the North Sea, the Mediterranean, West Africa, and some East Suez crude markets.
“Bonny Light, Forcados and Qua Iboe crude differentials declined in April against North Sea Dated, falling by a monthly average of 25¢, 68¢, and 92¢, respectively, to stand at a premium of $1.57 per barrel, $2.07b, and $1.78/b,” it said.
The price of Bonny Light, one of Nigeria’s benchmark grades, declined to $106.39 per barrel in April from $120.68 per barrel in March, according to the oil cartel.
It said despite strong refining margins, North Sea crude differentials corrected lower in April, specifically Forties, due to lower demand and higher supply, including WTI crude from the US Gulf Coast and sweet crudes from West Africa.
OPEC said Forties crude differentials dropped to the lowest discount against North Sea Dated since May 2020 on lower price offers due to a lack of regional demand and unfavourable arbitrage outside Europe.
“Similarly, West African and Mediterranean crude oil differentials weakened in April on soft crude demand from Asian refiners, particularly in China, the availability of prompt unsold cargoes, and the steady flow of light sweet crude from the US to Europe. Higher freight rates also added downward pressure,” it added.
Light sweet Nigerian crude is very similar to the light oil produced in the US.
Nigeria’s oil production dropped to 1.22 million barrels per day (bpd) last month from 1.24 million bpd in March, based on direct communication, according to OPEC.
The country’s oil output was put at 1.32 million bpd in April, compared to the 1.34 million bpd recorded in the previous month, according to the secondary source.
OPEC uses secondary sources to monitor its oil output, but also publishes a table of figures submitted by its member countries.
According to secondary sources, OPEC’s total crude oil production averaged 28.65 million bpd in April, higher by 153,000 bpd month-on-month.
“Crude oil output increased mainly in Saudi Arabia, Iraq and the UAE, while production in Libya declined,” the report said.
According to the report, the oil demand growth in the second quarter is projected to be slower at 2.8 million bpd, compared with 5.2 million bpd in the first quarter.
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“Demand in 2022 is expected to be impacted by ongoing geopolitical developments in Eastern Europe, as well as COVID-19 pandemic restrictions. Demand for OPEC crude in 2022 was revised up by 0.1 million bpd from the previous month to stand at 29.0 million bpd, which is around 0.8 million bpd higher than in 2021,” the report said.
World oil demand is projected to average 100.3 million bpd, which is 0.2 million bpd lower than the previous month’s estimates and approximately 0.1 million bpd higher than 2019, according to the report.
OPEC said in the first quarter of 2022, world oil demand recorded robust growth, mainly due to a strong economic rebound, supported by stimulus programmes and a further easing of COVID-19 containment measures amid accelerated vaccination rollouts.
“Downward revisions in 2Q22, 3Q22 and 4Q22 oil demand growth mainly took into account current economic forecasts and other developments that could potentially impact world oil requirements.”
