Nigeria production hiccups can trigger recovery in price of Vietnam, Malaysia crude premiums

Production hiccups in Nigeria coupled with an expected fall in Vietnam’s July exports come as a boon for regional crude suppliers, as these could trigger a recovery in price differentials for Southeast Asian grades this month, market participants said.

Market sentiment improved significantly in Southeast Asia in recent trading days as many Asian end-users, including Indian refiners, were widely expected to shift their focus from Nigerian supplies to Malaysian and Vietnamese sweet crudes in the near term.

Outages have hit various grades in Nigeria. The recent Qua Iboe outage compound existing woes. Operator Shell declared force majeure on similar grade Bonny Light. The month-long force majeure declared on distillate-rich Forcados crude has also reduced exports by 250,000 b/d.

“A lot of these WAF grades regularly move East, but surely now Asian buyers would have to look elsewhere,  there are plenty of (light and medium sweet) Malaysian crudes to fill the gap,” said a Singapore-based sweet crude trader.

Regional traders pointed out that Malaysia’s benchmark crude grades including Labuan, Kikeh and Miri, as well as light sweet Kimanis, often compete directly with light sweet crude grades in the Mediterranean and Nigerian markets.

Shell, alongside other equity holders, including Malaysia’s state-run Petronas, ConocoPhillips and Petroleum Brunei, are expected to offer Kimanis crude cargoes for loading in July over the coming days.

Trade sources said Vietnam’s overall July loading program is tighter than the previous trading cycle as well. PV Oil recently offered via tender 500,000 barrels of Ruby crude in two partials for loading in July, compared with a total of 550,000 barrels for loading in June offered last month.

“For regular [Asian] buyers of WAF crudes, they must look elsewhere because you simply do not know when production will return to normal in Nigeria,” said another Singapore-based crude trader. “With a much tighter [July] program, Vietnam and Malaysia supplies could be gone in a blink of an eye, so the suppliers would see much improved bids this time.”