The growing adoption of electric vehicles (EVs) and liquefied natural gas (LNG) as preferred energy sources in Asia has continued to weaken Nigeria’s crude oil export earnings from the region, its largest market, for two straight years.
The noticeable decline started two years ago when the Netherlands overtook India as the biggest buyer of Nigerian crude oil, marking a change in the dynamics of the West African nation’s energy exports.
Available data by the National Bureau of Statistics (NBS) revealed that India, China, Indonesia, Singapore, and Thailand have been the major buyers of Nigeria’s crude in the last seven years.
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Data gleaned showed that between 2018 and 2022, Nigeria generated N56.7 trillion from crude oil sales. Of this amount, Asia contributed N17.5 trillion, accounting for 31 percent of the West African nation’s total revenue from crude sales during the period.
LSEG Oil Research revealed that crude oil imports into Asia experienced a modest decline of 1.4 percent last year, marking the region’s first annual drop since the pandemic lockdowns, primarily driven by reduced demand in China.
“China and India would mostly buy from Saudi and Russia because the crude assay they require versus the discount tips it,” said Jide Pratt, COO of AIONA and country manager of TradeGrid.
Chinese oil imports reportedly declined by an average of 210,000 barrels per day last year, representing a 1.9 percent drop compared to the previous year, according to LSEG Oil Research estimates.
During the first 11 months of the year, China’s crude oil imports averaged 11.02 million barrels per day (bpd), based on customs data. LSEG estimated that December’s arrivals reached 11.63 million bpd.
While the decline may not appear significant, any reduction in China’s oil imports, regardless of its magnitude, is often perceived as a serious concern for the global oil market.
Consequently, this news is likely to influence oil prices. Brent and WTI Crudes rose to $76.85 and $74.25 per barrel respectively on Monday, indicating a 0.39 percent and 0.44 percent correspondingly.
The report attributed the decline to several factors, including the growing adoption of electric vehicles (EVs) in China, the transition of trucks from diesel to LNG, and slower economic growth compared to the previous two years.
As of July 2024, China has surpassed the 50 percent mark for new vehicle purchases, being EVs or hybrids. According to Macquarie Research, some might find it surprising considering the penetration was closer to 10 percent during early 2021. The penetration trend is attributed to government support.
However, a recent trend shows that Chinese car buyers are increasingly favouring hybrid vehicles over fully electric ones, which could signal a potential shift in oil demand this year.
Meanwhile, India is poised to overtake China as the world’s largest driver of oil demand growth in 2024. Forecasts indicate India’s oil demand will grow by 3.2 percent this year, compared to a more modest 1.7 percent growth projected for China, according to S&P Global Commodity Insights.
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For 2024, LSEG Oil Research projects India’s oil demand to grow by a robust 2.3 percent, equating to just over 100,000 barrels per day. This positive outlook is primarily attributed to the country’s expanding refining capacity, which plays a pivotal role in driving its demand growth.
According to Reuters’ analysis, a significant portion of the additional output from these refineries is expected to be exported. This means much of the increased oil derivatives production will not directly represent domestic demand for petroleum products within India.
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