Demand for Nigeria’s crude oil drops

Global oil22 July 2014, Lagos – The effects of the new era of energy sources may have hit hard on Nigeria’s export market, as the nation’s crude differentials and demand at the international market dropped to the lowest ebb in the past two years.

Specifically, a large quantity of Nigerian crude oil cargoes for August export has remained unsold, even as September loading schedule was released to market, thereby increasing pressure on already weakened differentials.

Reports showed that about 20 or 25 Nigerian cargoes were still on sale out of a total of 65 for August export. Traders said that this was the biggest supply glut they had seen for years and that sellers may be forced to keep differentials at multi-year low to attract buyers.

“With the August cargo overhang going into the new September trading cycle, it’s hard to see any upside in grade differentials, especially for Nigerian grades,” a trader said.

The decline state was linked to the emergence of shale oil in the major oil importer nations such as the United States, and some asian countries.

Other observers believed that the return of Libyan crude to the market was also weighing heavily on prices. The 340,000 barrel-per-day El Sharara oilfield resumed operations after protesters ended a four-month strike.

A trader was differ in opinion, stating that freight costs for suezmax-sized vessels were also acting as a deterrent to European buyers, who would look to buy cargoes from nearer destinations such as the North Sea or Mediterranean.

“Freight has gone crazy, so people who are buying for later dates will wait in hope that prices will fall,” the trader said.

However, the preliminary loading schedule for September showed that Nigeria’s Qua Iboe crude stream will load 380,000 barrels per day (bpd) including two cargoes deferred from August. The programme was revised down from an initially planned 398,000 bpd in August.

Excluding the deferrals, Nigeria will export 10 cargoes carrying some 317,000 bpd of the benchmark grade in September. Other grades on the list including Bonny Light and Forcados were broadly in line with levels from last month.

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