In push to sell more crude, Nigeria, Saudi Arabia cut oil prices
With the steady flow of light sweet crude from the United States to Europe and COVID lockdowns curbed demand in China, the world’s biggest crude importer, Saudi Aramco and Nigeria have cut prices for buyers in Asia for the first time in four months despite the global era of over $100 oil price.
Global markets were rattled two months ago by western sanctions on Russia, the world’s biggest combined crude and oil products exporter, that could curb supplies, pushing Middle East spot premiums and term prices to record highs.
However, COVID-19 restrictions across China cooled demand causing prices to tumble this month. Also, large volumes of Russian oil displaced by European sanctions are still heading to China and India while Japan and South Korea are releasing strategic oil reserves, easing supply concerns.
To reflect these changes, State oil company Saudi Aramco cut its June selling price for its major export grade, the Arab Light crude, to $4.40 a barrel above a benchmark price for cargoes, according to Reuters, Bloomberg and S&P Global.
This premium for buyers in Asia is less than half the $9.35 per barrel — an all-time high — it had set in May, the outlets reported.
Data gleaned from the Organization of the Petroleum Exporting Countries (OPEC) also showed the prices of three major Nigerian crude oil grades fell last month.
According to OPEC, the development is 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.
“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.
Finding by BusinessDay showed the lingering Russia/ Ukraine is biting harder, posing a further threat to Nigeria’s oil revenue as a foray of big players in India’s fossil-fuel industry are turning to Russia’s offer to buy oil and commodities at a record discounted price.
According to Reuters, India’s purchases of Russian crude have soared since the conflict’s start, rising from nothing in December and January to about 300,000 barrels a day in March and 700,000 a day in April.
The crude now accounts for nearly 17 percent of Indian imports, up from less than 1 percent before the invasion. Last year, India imported about 33,000 barrels a day on average from Russia.
“With Russian oil banned in the United States and Europe now proposing an embargo of its own, India can buy the crude at substantial discounts, powering its energy-thirsty economy at a lower cost. Indian refiners can also use the crude to make products like diesel and jet fuel and sell it at better-than-usual margins abroad,” Luqman Agboola, head of energy and infrastructure at Sofidam Capital, said.
This development is significant for Africa’s biggest economy because India represents the largest importer of Nigeria’s crude oil, earning the sub-Saharan country about N13.9 trillion since 2015, according to data gathered by BusinessDay.