West Africa Crude: Differentials at two-year low on large Nigerian supplies

 

A large supply of Nigerian oil available for purchase outweighed the impact of better gasoline refining margins in Europe to leave differentials at two-year lows.

There were still as many as 40 Nigerian cargoes available to purchase out of a total of 65.

Light, low sulphur Nigerian crude is popular with European refiners to produce gasoline.

Refining margins for the fuel have raced higher since the start of June, which would typically have acted as a strong support for crude differentials.

However the glut of oil and the low price of competing grades has seen buyers sit on the sidelines, awaiting further weakness before moving into the market.

“I see some talk of better mogas (gasoline) margins but I think the sheer weight of unsold cargoes at this point in the cycle is likely to weigh further on value for a few weeks yet,” a trader said. “I don’t think we’re a the low point yet.”

The benchmark Qua Iboe was selling at premiums to dated Brent at its lowest in around two years, and traders saw scope for further falls.

“This time last week I was a little less bearish, but as time goes by, with limited trading activity and Libya seemingly resolving itself  somewhat, the pressure to drop prices is building ahead of the next trading cycle,” the trader said.

He was referring to Libyan oil production which is beginning to recover after nearly all its 1.4 million barrel per day output was stopped due to protests and violence.

Libya’s El Sharara oilfield has resumed operations and will increase output gradually, state-run National Oil Corp (NOC) said on Tuesday, in another breakthrough for the government to end the wave of protests at oil facilities.
NIGERIA

Qua Iboe: Around five cargoes are on offer at dated plus $1-80-$1.90, a trader said, in line with Monday. The grade was assessed at dated plus $1.30-$1.50, around its lowest since July 2012, Reuters data showed. Traders said it may drop to below $1 over.

Royal Dutch Shell has yet to lift a force majeure on output from its EA field that was declared in June, a spokesman for the company said on Tuesday.

ANGOLA

Nemba: Two cargoes still available. Offered at dated Brent minus $1.75, a trader said.

Dalia: Two cargoes offered at dated Brent minus $3 a barrel.

ASIAN TENDERS

Indian Oil Corp is running a buying tender with the result expected on Wednesday. It is expected by traders to take September cargoes.

Reuters