Oil surges near $69 but traders shun Nigeria’s crude
Brent, the benchmark of Nigeria’s crude oil is extending gains after closing at a six-week high but the benefits may elude Africa’s largest oil producer who is currently struggling to find buyers for its crude.
On Thursday, Brent traded at $68.47 a barrel at the international market, however, the development leaves nothing to cheer for Nigeria which has a high proportion of May export unsold. The crude price is being pushed by a combination of fierce competition from usual rivals, decreasing purchase from India as a result of COVID-19 restriction and demand from Spain remains off the table.
As much as half of Nigeria’s planned crude loadings for May haven’t yet found buyers, according to oil traders specialising in West African grades. Nigeria is due to export around 1.68 million barrels of crude a day in May, the largest rate in three months, according to data compiled by Bloomberg.
Viktor Katona, a group physical trader at MOL Group said roughly half of May 2021 loaders of Nigerian cargoes were still available, an unusual development compared to previous times, attesting to the difficulty facing Nigerian oil in the international recently.
For a country fighting its worst financial crises in recent years, Nigeria may be forced to heavily discount its barrels as it finds itself in a dog-eat-dog oil trading market.
Nigeria National Petroleum Corporation (NNPC) has already reduced prices for its main export streams for Bonny Light, Brass River, Erha, Qua Iboe by 61percent per barrel from their April 2021 prices, according to data sourced from Oilprice.com.
“As low as this might seem, these levels are some 40-50 cents per barrel better than the actual May spot market,” Katona said.
In recent weeks, Nigeria’s rivals are pumping crudes to the markets as some of the OPEC+ causing an unprecedented expansion of light sweet crudes available to buyers, which means refiners across continents can choose from a plethora of options.
“Now that the market has been backwardated for several months already, the shipping market no longer experiences any dearth of vessels, thus Nigeria, located mid-way between Europe and Asia is compelled to fend off competitors from all sides,” Katona told oilprice.com.
Also, India’s current COVID-19 travails foreshadow further difficulty for placing Nigerian cargoes in their prime market outlet. National demand for transportation fuels is bound to drop by at least 20 percent in April in India as regional governments introduced lockdowns once again, including the capital New Delhi.
According to market sources, from December 2020 to March 2021 oil producers from Nigeria loaded an average of 11 to 12 million barrels monthly, the volume reduced to 8.8 million barrels in April, while the market expects a further reduction in May 2021.