*Crude remains unsold as buyers seek alternatives
16 January 2015, Sweetcrude, Abuja – Nigeria’s foreign exchange reserves fell to $34.51 billion by Jan. 13, down 20.2 percent from $43.24 billion a year earlier, owing to drawdowns by the central bank to defend the local currency, the naira.
Data from the central bank on Thursday showed the reserves of Africa’s biggest economy have steadily declined, falling 3.2 percent month-on-month from December, when they stood at $35.66 billion.
The naira has remained under pressure, trading outside the central bank’s target band of 160-176 to the dollar, as oil prices plunge. This is despite a devaluation meant to find the currency’s true value and shore up Nigeria’s foreign reserves.
Meanwhile, reports have shown that Nigeria’s revenue from crude oil exports, which is currently taking a hammering from the lingering decline in crude oil prices, is set to continue dropping as buyers of the commodity appear to be looking elsewhere.
Specifically, about 35 million barrels of the country’s crude oil remained unsold at the international market as at December 2014. Also, the country’s crude oil production dropped by 17,300 barrels per day from 1.919 million barrel per day it recorded in November to 1.902 million barrels per day in the month under review.
Furthermore, Asian countries, which Nigeria turned to when the United States stopped buying Nigeria’s crude oil due to the shale boom, now prefer Angolan grades.
The Organisation of Petroleum Exporting Countries (OPEC) made this disclosure in its December report and attributed this development to weak crude oil demand at the international market.
According to OPEC, low European refinery demand amid weak gasoline and naphtha margins has put pressure on West African crudes, most especially, Nigerian light sweet crude. It said that Angolan grades have predominantly sold out, supported by robust Chinese buying, though values have fallen for heavier Angolan grades, as they compete with cheaper Mideast Gulf supplies.
The report disclosed that the price of Nigerian Bonny Light dropped by $16.80 or 21.2 per cent in December to $62.53/b, accumulating about $49 in losses since June. The cartel also said that crude oil buyers are taking advantage of the price decline and current supply glut by buying and storing of product with the hope of selling at higher prices later in the year.
OPEC said that the United States, which used to be Nigeria’s biggest crude oil buyer, has increase its export providing an outlet for additional production that would otherwise have added to the country’s stockpiles.
OPEC forecasts that demand for the group’s oil will drop to 28.78 million barrels per day (bpd) in 2015, down by 140,000 bpd from its previous figure and the lowest since 2004. It however also trimmed the rate of growth in non-OPEC supply partly due to a slowdown in the U.S. shale boom.
“As drilling subsides due to high costs and a potentially sustained low oil price, production could be expected to follow, possibly late in 2015,” it said.