A Review of the Nigerian Energy Industry

Nigerian crude to sell in US on arbitrage opportunities

Oscarline Onwuemenyi 16 September 2015, Sweetcrude, Abuja – Nigerian crude appears to be enjoying a little respite lately as the Brent/WTI crude futures spread narrows, arbitrage opportunities are beginning to open up for Nigerian crude to head trans-Atlantic, with a few cargoes said to be heading to US refineries, trading sources said.
Crude oil vessel.
Crude oil vessel.

Two Nigerian grades, including at least two cargoes of flagship crude Qua Iboe as well as Bonga, were heading to US east coast refineries as well potentially down to the US Gulf Coast, traders said.

“It is bits and pieces, not massive flows,” one crude trader said.
One cargo of Nigerian crude is heading over regularly to the Delta Airlines refinery in Trainer, Pennsylvania, a source close to the matter said, while Philadelphia Energy Solutions was also heard to have bought Nigerian crude, including an end-September loading cargo of Bonga and, potentially, a cargo of Qua Iboe.
PES spokeswoman Cherice Corley declined to comment on the refinery’s commercial and supply operations.
Shipping fixtures seen by Platts showed PES, Exxon and Statoil chartering vessels to take West African barrels to the US for end-September loading cargoes, and traders have said Vitol’s October 3-4 loading Qua Iboe cargo was also heading to the US.
Sources at Statoil and Vitol were not available for comment, while ExxonMobil spokesman Paul Tindall declined to comment.
Traders cited the narrower Brent/WTI spread and good US refining margins as the main factor pulling Nigerian barrels.
“I think Qua works because of the arb and margins,” a crude trader said. “The arb is low enough for [refineries] with good jet margins to buy it.”
While flows of Nigerian crude to the US during June and July were partly driven by high prices for domestic light sweet crudes, such as Louisiana Light Sweets, that has not been the case for the recent moves.
“US grades have really been sideways all week,” said one US crude trader. “The biggest change has been in the arb.”
The spread between Brent and WTI has narrowed over the past week, with the October contracts’ spread as narrow as $2.96/b, the lowest since June 30.
European refiners have been the main buyers of Nigerian crude in October so far due to good refining margins on the continent but other light sweet crudes in the North Sea and Mediterranean are coming off and could compete, traders said.
It was a buyer’s market for light sweets in the Atlantic Basin, pressuring North Sea grades such as Ekofisk and Oseberg and key Mediterranean grades such as Azeri, they said.
As a result, Nigerian crude could continue to flow to the US, traders said, especially as values were starting to come under pressure again with November’s program likely due out next week and at least 30 million barrels still available for October.
“We only have one full week of trading left [before November],” said one crude trader.
Qua Iboe was assessed Thursday at Dated Brent plus $1.05/b, while Bonga was at Dated Brent plus $0.70/b.
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