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Nigeria struggling to sell its oil amidst price rally

Nigeria’s Brass River, Qua Iboe nears $90 as geopolitical risk heightens

Nigeria is still struggling to find buyers for its oil with more than half of the country’s April crude oil supply still unsold according to Bloomberg.

Nigeria’s woes have worsened by strikes at French refineries and seasonal maintenance at plants elsewhere in Europe which have acted together to curb demand.

Only a little of Nigerian crude traded last week, with more than 20 shipments for April loading still hunting for buyers, according to traders specializing in the West African market.

That’s similar to 10 days ago, when 20 to 25 of the cargoes — holding 1 million barrels of oil each — were on the market.

That’s a much weaker position than normal for this time of the month — when trade should be moving on to May’s barrels — and the prices the shipments can fetch are dropping, they said. Each cargo is about a million barrels of crude.

Even as crude sales sputter, output in the West African nation has rebounded. Nigeria has been reviving production at some key streams such as Bonny Light that were halted for months by crude theft and technical issues.

Read also: Oil producers under OPEC alliance to cut output by 1.16m from May

Sellers have limited options to clear the glut of oil, consultancy FGE said on March 29. Cargo holders could look to resell their supplies at a discount, or hold the volumes in floating storage until the refinery strikes are over, Steve Sawyer, director of refining at FGE, said.

Typically one of Nigeria’s biggest buyers, France took an average of 110,000 barrels a day of Nigeria’s oil over the past year, according to tanker-tracking data compiled by Bloomberg.

But that demand has shriveled this month, with France’s overall crude imports dropping by half in March as the nationwide dispute over pension reforms escalates, according to Wood MacKenzie.

Well over 80% of France’s 1.1 million-barrels-a-day processing capacity is halted or in the process of shutting down because of the industrial action, data compiled by Bloomberg show.

In addition to the impact of the strikes, other plants in Europe are also buying less crude because of seasonal maintenance, according to the traders.

Capacity is offline at some typical destinations for Nigerian crude such as Spain’s San Roque refinery and Italy’s Sarroch plant. Facilities that have halted capacity for work also include Shell Plc’s Pernis refinery near Rotterdam, Europe’s biggest plant.

“The Nigerian backlog is a combination of higher freight costs, lower tanker availability — specifically into Europe — as well as lower overall demand for West Africa light sweet as crude from other regions is deluging markets,” said Viktor Katona, lead crude analyst at Kpler.

Northwest Europe’s reduced buying matters for West Africa because alternative outlets are limited, traders said.

Mediterranean refiners can choose to skip Nigerian supply in favor of cheap North African barrels that ship more quickly to the region, or they can process some of the large volumes of US West Texas Intermediate crude that have been arriving in Europe in recent months.

Long-haul buyers like Indian Oil Corp. and Indonesia’s Pertamina have been taking more discounted Russian volumes this year, easing their need for Nigerian supply. China’s Unipec favors processing oil from Angola, where only around five April shipments are still available, the traders said.

Another driver of the unsold glut has been Nigeria’s revival of crude production that was shuttered in recent months by theft and technical issues, such as the nation’s Bonny Light stream. Nigerian export capacity may now exceed what the market needs in April and May, according to Katona.