Nigeria’s crude oil market is shrinking

Africa’s biggest oil-producing country recorded less volume of crude oil exports in the month of October. Data from IHS Markit Commodities at Sea revealed Nigeria has primarily been shipping crude oil to India, USA and other European countries, primarily Spain, Netherlands and France as October volumes have been pushed lower to 1.6 million bpd, having fallen below 1.8 million bpd for the first time since late July.

However, demand for rare large size Suezmax tankers increased, latest data from an algorithm-driven model for seaborne vessel movements IHS Markit Commodities at Sea has revealed.

Further breakdown revealed Nigeria exported crude oil of approximately 0.73 million bpd to the whole of Europe compared to 0.83 million bpd in September while India received 0.3 million bpd of Nigeria’s crude oil compared to 0.2 million received in the previous month.

“This is really a short time effect as it’s not always easy for oil buying countries to switch countries they buy oil from because of the contracts signed by both parties are long term,” Emmanuel Afimia an energy analyst at Afimia consulting services said.

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Nigerian oil export plans are prone to revisions and delays, with cargoes frequently pushed from one month to the next.

There are also reports that Nigeria’s crude oil exports are under pressure as the United States is flooding Europe market with a large volume of crude.

In order to maximize the opportunities in its exportation of crude oil demand for shipping on large size Suezmaxes increased last month, with loadings having surpassed 1.45 million bpd for the first time since July 2018. This means that almost two Suezmax ships were fully loaded in Nigeria on a daily basis throughout October.

Nigeria uses mostly Suezmax vessels for its crude exports. Suezmax is medium to large-sized ships with a DeadWeight Tonnage (DWT) between 120,000 to 200,000.  They are designed to pass through the majority of the ports in the world.

While the Supertankers also known as Very Large Crude Carriers (VLCC) had average volumes of 236,000 bpd, which was less than half the average volumes of 550,000 bpd loaded in Q3 2019.

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VLCC also known as Supertankers are the largest operating cargo vessels in the world, these giant ships are capable of carrying a huge amount of crude oil in a single trip.

This means that there were only four full cargoes for VLCCs in Nigeria last month. Charterers seem to have preferred loading on Suezmaxes, as VLCC rates went through the roof much faster following the US sanctions on COSCO tankers.

Spot rates for both size segments have been falling quickly during the last couple of weeks, with the correction expected to last.

“We expect market shares to shortly return back to normal levels, with Suezmax loadings to drop back to around 1.2 million b/d (three vessels every two days) and close to 500,000 b/d for VLCCs (one full cargo every four days),” IHS Markit Commodities at Sea said.

Loading programmes seen by Reuters have also said exports of Nigeria’s Forcados and Qua Iboe crude oil streams will fall in December.

According to Reuters, Forcados will load 9 cargoes at a daily rate of 257,000 barrels down from 263,000 bpd in November while Qua Iboe will load 7 cargoes at a daily rate of 215,000 bpd assuming a cargo size of 950,000 barrels. This is down from 8 cargoes in November at 245,000 bpd.

Loading programmes for other grades are also expected to trickle out. Escravos will load 6 cargoes, Agbami will have four, Amenam three cargoes and Yoho will have one in December.