After losing the US market as one of its major destinations for its crude oil export, Nigeria might be up for a big fight for its Asian market share as a result of rising US exports into Asia in the past few months. Higher transport costs to Asia would have required big discounts from US to capture a market share but a drop in freight rates contributed in making US cargoes more competitive.
Freight costs from the US Gulf Coast to Asia have fallen by about a third since early December 2018, making the case for greater loadings of US crude to the region. Freight from West Africa to Asia have increased recently, making it currently about 70 cents/b more expensive to bring Nigerian crude to the market.
Shipping reports for January 2019 loading cargoes reveal that 16 VLCCs were seen carrying US crude from the US Gulf Coast to Asian destinations. Around 17 VLCCs have been fixed to load crude from the US Gulf Coast to Eastern destinations for February-loading cargoes, shipping reports showed, with many more likely booked outside of reported fixtures.
“There is the potential for Q2 2019 US crude exports to Asia to be higher year-on-year if the WTI/Brent spread remains in the range it has in recent months and with the lower freight rates,” said David Arno, oil analyst at analytics firm
Offers for US crude arriving in Asia in the second-half of March or April are about 50 cents a barrel lower than a month earlier, market sources said, making it more competitive against crude oil from West Africa. Nigeria’s Qua Iboe was last valued at a premium of around $1.85 to dated Brent.
Nigerian crude has had a difficult time clearing for several weeks, as offer levels were too high to attract buying interest from European refineries which have been suffering from poor refinery margins on naphtha and gasoline.
Since its crude export ban was lifted in 2015, US is becoming a major player in global crude markets. Industry sources indicated that US crudes continued to attract the attention of plenty of Asian buyers directly competing against Nigeria’s light sweet crude.
Most European countries; United Kingdom, Netherlands, Italy, France, and Spain, which used to be Nigeria’s export destinations, are now taking crude oil from the US.
It will be recalled that Nigeria saw a significant reduction in US imports of its crude from 2012, following the shale oil production boom. US crude oil import from Nigeria fell from 40 million barrels in 2007 to less the 6.17 million barrels in June 2013 barely a year after the advent of the shale oil boom. In October 2017, the export of Nigerian crude to US rose by 56 percent to 13.67 million barrels from the 2013 levels.
FRANK UZUEGBUNAM
