Excess Nigeria cargoes halts oil’s one-week bullish run

Excess crude oil cargo from Nigeria and data showing that OPEC crude oil production rose in June, helped put a halt to a one-week crude oil price rally in the international markets yesterday.

Crude oil prices fell by more than 20 percent from their January levels to a low of slightly above US$45 before this week’s rally to above US$49.

Prices however headed back downwards again yesterday, with Brent Crude, with which Nigeria’s crude oil grades are benchmarked, declining 3.4 percent or US$1.38 to close at US$48.23

The decline has been blamed on reports from Thomson Reuters Oil Research, which show that OPEC oil production rose in June, despite the agreement in May by the oil cartel to extend a deal to March 2018 restricting production by 1.8 million barrels a day. The Thomson Reuters data show that OPEC exported 25.92 million barrels per day in June, up 450,000 May and 1.9 million bpd more than a year earlier.

International news agency, CNBC also reports that shipments from top oil exporter, Saudi Arabia and other OPEC members were on the rise in June, based on oil tanker movements in international waters.

Nigeria and Libya, which are exempted from the OPEC cuts, are also adding pressure to crude oil prices as production picks up in both countries. But with excess crude in the market, Nigeria is even finding it difficult to find buyers for its crude, according to reports by Reuters.

Nigerian crude for August loading is proving slow to find buyers, amid rising supply, oil trading sources told Reuters on Wednesday.

Traders say this is a sign that an expected second-half rebalancing of the global market is getting off to a slow start which could mean prices will still remain depressed in the second half of the year, putting at risk Nigeria’s revenue projections.

An increase in production in Nigeria and Libya, is adding to the volume of light sweet crude looking for buyers in the Atlantic Basin, despite an OPEC-led supply cut aimed at getting rid of a surplus.

Oil traders say there are at least 40 unsold August-loading Nigerian cargoes looking for buyers, the equivalent of almost half of daily of world demand and a higher volume than at similar points in earlier months.

“It’s starting to clear but there are still 40 plus left,” said a trader, who said the excess supply for August loading was higher than earlier months, as production has increased.

“It’s more because there is a much bigger programme in August. It’s slow on Nigerian.”

Lingering cargoes of crude from Nigeria, Africa’s biggest exporter, have been a feature of the market this year , weighing on prices since Nigeria’s crude is sold in relation to Brent, the global benchmark.

Such signs of excess should start to be less visible in coming months if, as analysts like the International Energy Agency, forecast the global market tightens in the second half of the year, helped by the OPEC cut.

But Nigerian exports are set to exceed two million barrels per day (bpd) in August; a 17-month high, and on Tuesday, the head of the IEA said further increases by key producers could hamper the rebalancing.

“It is still a buyer’s market,” said Olivier Jakob, analyst at Petromatrix. “This is really the peak demand season and it does not feel particularly strong in the crude oil market.”

To be sure, traders say some Nigerian crude grades for August are selling well, such as distillate-rich crude Forcados, and traders say the number of remaining July-loading cargoes has dwindled to less than 10.

There were more signs of strengthening in the North Sea crude market, where the number of cargoes in floating storage has declined and production is set to fall in August, amid seasonal oilfield maintenance.

Angolan crude has traded more quickly for August loading than in recent months, supported by increased demand from China, the biggest buyer, traders say.

Meanwhile, Addax Petroleum has agreed to pay 31 million Swiss francs ($32 million) to settle charges of suspected bribery of foreign officials, the Geneva prosecutor’s office said on Wednesday.

Prosecutors for the Swiss canton of Geneva investigated the company, whose chief executive officer and legal director were also charged, over several tens of millions of dollars in payments to a company and several lawyers in Nigeria.

A four-month investigation found the payments were not sufficiently documented and doubts remained on their legality, but no criminal intent was established, the Geneva prosecutor’s office said in a statement.

It added that Addax acknowledged possible organisational shortcomings and had taken measures to improve internal anti-corruption procedures.

With this settlement, the cases against the CEO and legal director have also been closed, a spokesman for the prosecutor said.

Addax was bought by China’s state-owned Sinopec, Asia’s largest oil refiner in 2009.

Addax said in an emailed statement that its CEO had resumed his duties, while its chief legal officer retired on June 30.

“Addax Petroleum is committed to conducting its business with the highest level of integrity, and in full compliance with applicable laws, regulations and industry standards,” the company said in a statement.