• Wednesday, May 29, 2024
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BusinessDay

Nigeria’s glut of unsold oil starts to shrink as prices weaken

Higher oil price seen easing rising oil loan pressure

Nigeria’s crude oil for loading this month is finally showing signs of starting to clear out after a weak pull from Europe forced some sellers to lower prices.

About 10 cargoes of the country’s crude for May loading were still available for purchase, according to the median estimate of three traders specializing in the trade. While that’s still around a fifth of the West African producer’s exports for this month, more deals were expected to be completed this week after offer prices eased, the people said.

West African barrels are typically put on the market about six weeks before their loading month, underlining the sluggish pace of sales for Nigeria’s May supplies.

That’s another sign of a wider bearish crude market in the Atlantic Basin, with a burst of US oil exports depressing prices of refinery feedstocks from Europe and West Africa, even as European refineries begin returning from routine seasonal maintenance. Prices have also weakened for rival suppliers to Europe’s plants, such as Azeri Light and West Texas Intermediate.

“We’ve got much weaker margins so crude demand is taking a hit,” said James Davis, director of short-term oil market research at FGE.

Nigeria’s lag was also driven by sellers seeking premiums over the Dated Brent benchmark that proved too high for refiners in Europe, according to Energy Aspects Ltd.

“May cargoes were at a premium that didn’t work that well into Europe, but lower offers have seen volumes move,” said Christopher Haines, EA global crude analyst. “Stronger forward diesel pricing is also helping.”

Some Nigerian grades were being priced more competitively, including Qua Iboe to Asia and Bonny Light to the Mediterranean or East, with the overhang slowly reducing, Sparta Commodities said in a note earlier this week.

June, July Sales
Still, a further 30 shipments of Nigerian oil for loading next month remain on sale, and July’s supplies are due to hit the market later this month, the traders said. Typically each of the cargoes holds about one million barrels of crude.

By contrast, Angola’s sales to China have held up well, with less than 10 shipments for June loading looking for buyers out of 37 scheduled. Much of Angola’s crude is of a medium-to-heavy sweet variety that can suit China’s refiners better than Nigeria’s lighter output.

China’s Unipec purchased three shipments of Angolan crude for June loading late last week, while Rongsheng Petrochemical bought Angolan supply for July arrival.