Nigeria struggles to sell its crude in an oversupplied market

An oversupply of light, sweet crude in the international market is putting pressure on the sales of Nigeria’s crude oil grades.

Buyers of Nigerian crude are staying on the sidelines despite the fact that oil majors are offering the crude at significant discount to Brent.

“The market is already oversupplied and Nigeria has to look into other options beyond just sale of crude oil. This is time to start looking inwards as this trend will continue,” said Chuks Nwani, an energy lawyer.

ExxonMobil and Vitol have been offering cargoes of Qua Iboe at dated Brent plus 75 cents a barrel loading in early August. Lukoil also offered an August 9 and 10 but without bids according a report by Reuters.

Reuters also report that Mercuria, a major trader, sold a cargo of Qua Iboe to Reliance loading July 8 below dated Brent plus 50 cents a barrel, a lower discount that normal while Eni was offering August loading Brass River at dated Brent plus 85 cents a barrel.

Reuters report that around 10 to 15 cargoes of crude oil are still available from Nigeria’s July loading and plenty from the August schedule, which has 67 cargoes on offer.

Nigeria’s crude oil production is expected to hit over two million barrels per day after the country lifted a force majeure on the Trans Forcados pipeline helping boost crude oil production by more than 250,000 barrels per day.

Shell also lifted force majeure on Nigerian Bonny Light crude exports on June 28 after a leak on the Trans Niger Pipeline was repaired, helping further boost production.

The spike in Nigeria’s production also comes at a time Libya, which like Nigeria, is exempted from adhering to OPEC production cuts agreed in May, has seen its production hit new levels of close to a million barrels per day, the highest in two years.

Coupled with increased production from Shale producers in the United States, the international markets is over wash with crude oil, putting pressure on prices which has dropped at an average of 20 percent since the beginning of the year.

In the light of this, analysts at Goldman Sachs, a leading global investment firm has called on Nigeria to lower oil production taxes to remain competitive  as shale producers ramped production by 190 billion barrels in 17 years.

 ISAAC ANYAOGU with Agency Report