country is currently having difficulties getting buyers for its crude
oil in the international market, even as the price of its various oil
grades have been on a downward trend over the last couple of months.
Data obtained from global energy information providers, revealed that
Nigeria is currently recording supply glut in the sales of its crude,
as buyers seem to prefer other competing grades from other countries.
Analysts are of the view that unless an improvement is recorded in the
days and weeks ahead, the Nigerian economy would be plunged into a
financial quagmire, as it would be starved of funds to fund its budget
and manage the affairs of the country.
Specifically, a Reuters data indicated that Nigeria had been only able
to get buyers for 22 of its 62 December 2015 loading cargoes, leaving
around 40 cargoes of nearly every grade of its crude still unsold.
The data said that Qua Iboe was better supported, having cleared most
of its December loading cargoes, while other grades, including
Forcados, Bonny Light, and Escravos were under substantial pressure.
However, in Angola, Nigeria's fierce competitor, Reuters said there
were still at least eight cargoes from the December programme looking
for buyers, including Pazflor and CLOV.
Platts, on the other hand, said Nigerian crude oil market remained
under pressure, as many grades have lost around $1 per barrel in value
since the start of October, especially as an abundance of sweet crude
and high freight rates have failed to excite interest from refinery
buyers.
The loss of value was attributed to a number of factors — pressure
from high freight rates, competing Mediterranean and North Sea grades
and general weakness in refinery margins, which have improved over the
past week but not enough to counteract the glut of sweet crude.
The report quoted traders as saying that Nigerian grades account for
the bulk of the estimated 65 million barrels or so still unsold from
November and December West African (WAF) crude programmes.
"There is a big overhang, with such cheap Urals and Azeri (Light in
Europe) for instance, European refineries can take closer grades and
that is clearly affecting WAF grades," one European refinery trader
said.
Reuters also said that sellers of Nigeria's oil were forced to cut
differentials again, as around two thirds of the December export
cargoes remained available, and was expected to be joined by the
January exports this week.
One oil trader said: "Every crude oil grade is available, and you even
have the choice of when it is going to load. You have equity holders
in a rush to sell what they have."
However, some traders are of the view that refinery margins remained
positive still, with gasoline demand in Nigeria itself helping to
support European and United States' refining margins, and buyers in
California and Asia also keen to import more gasoline.
As a result of the glut, prices of Nigeria's crude oil grades took a
hit, as Qua Iboe was assessed last week by Platts, at Dated Brent plus
$0.20 per barrel, the lowest since January 13, and down from Dated
Brent plus $1.25 per barrel at the start of October.
Escravos, on the other hand, was assessed at Dated Brent minus $0.15
per barrel, its lowest value since April 17, 2009, when it was
assessed at Dated Brent minus $0.175 per barrel.
Bonny Light and Forcados, also premium Nigerian grades, were down $1
and 90 cents per barrel, respectively, since the beginning of October,
with the latter at Dated Brent plus $0.20 per barrel, the lowest since
mid-July.
Bonga, which has dropped 90 cents per barrel since the beginning of
October to Dated Brent plus $0.10 per barrel was offered by Vitol
earlier last week, in the Platts Market on Close assessment process,
without attracting interest even as an offer for an early December
cargo dropped to Dated Brent minus $0.15 per barrel last Wednesday.
Other Platts-assessed Nigerian grades – Agbami, Akpo, Brass River,
Erha and Usan, have also weakened. Naphtha-rich grades Agbami and Akpo
are now both a $1 per barrel discount to Dated Brent.
Brent, the benchmark crude oil grade, was trading around $44.51 per
barrels over the weekend.
However, the reports sated that an easing in freight rates out of
Africa should also help spur buying interest in Europe and the United
States, adding that with Mediterranean and North Sea oil also under
pressure, and oversupplied, the fight for buyers could yet cause more
pain for oil producers.
-Vanguard
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