Why Nigeria is struggling to sell her oil in 2021
Nigeria has been struggling to sell its oil since the beginning of May. The reports indicate that Nigeria, which is West Africa’ s biggest oil producer, is due to export around 1.68 million barrels of crude a day in May, the largest rate in three months. The recent rebound in U.S. crude production following freezing weather has meant a surge supplies of U.S. light crude,…
Nigeria has been struggling to sell its oil since the beginning of May. According to reports, the country’s planned crude loadings for May have not yet found buyers.
The reports indicate that Nigeria, which is West Africa’s biggest oil producer, is due to export around 1.68 million barrels of crude a day in May, the largest rate in three months.
The recent rebound in U.S. crude production following freezing weather has meant a surge supplies of U.S. light crude, a key rival for Nigeria toward Europe.
This was revealed in a monthly report released on Wednesday by the International Energy Agency.
That’s compounding already-slow sales of Nigerian crude to Europe, where buying has been weaker for months as refineries ran at low processing rates amid the pandemic.
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Although the global economy is on an upward slope overall, the effects of coronavirus continue to be felt particularly in India with a significant impact on oil consumption in particular.
According to information compiled by trade sources, Nigeria has also been struggling to sell its crude shipments since the beginning of May due to India’s inability to tender for the purchase of black gold.
India, which is one of the largest buyers of Nigerian oil Agbami, Akpo, Bonny Light and Forcados, is facing a wave of Covid-19 contaminations affecting its domestic consumption.
Despite Nigeria’s agreements with India, Indian refineries are simply not buying at this time because of the negative effects of Covid-19.
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To reverse this trend, Nigerian crude sellers are looking for other buyers in Asia (Indonesia, Taiwan, Thailand) and Europe.
On the Asian side, this demand could help sell between 25 and 28 unsold Nigerian shipments this month. As for demand from Europe, traders hope that demand will increase as West Texas Intermediate (WTI) light crude currently dominates the European market.
Nigeria relies heavily on revenue from the sale of hydrocarbons to finance its economy. Oil and gas revenues account for about 50% of federal government revenues and more than 90% of export earnings.
It’s not just Nigeria that is facing weaker demand. Africa’s second largest crude producer, Angola, has yet to sell about 30% of its 33 export cargoes for May loading, according to traders. Each shipment hauls between one and two million barrels of crude, with the majority of cargoes typically sailing to refineries in China.
Another crude favored by China, the Republic of the Congo’s Djeno grade, has also been slow to sell its upcoming volumes. Three shipments for loading next month are still available out of a total of seven consignments scheduled, traders said.
The value of West Africa’s crude in comparison to future supplies in the benchmark North Sea region has “deteriorated steadily” in recent months because of weaker demand from Europe and Asia.
Nigeria’s Bonny Light crude was priced at 85 cents per barrel less than benchmark North Sea Dated Brent earlier this month, sliding from a discount of 25 cents per barrel in February.
Angola’s heavy-sweet Cabinda grade fell to a discount of 55 cents per barrel to North Sea Dated in early April, compared with a premium of 35 cents in February.
Sales to Asia have also been disadvantaged by the widening gulf in a key oil price marker for West-East crude flows that makes Africa’s oil more expensive to ship to Asia.
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