As Nigerian crude demand slows, US-China trade war could provide spark

Nigeria’s crude demand has slowed considerably in recent times with an overhang from August still pending. While September cargoes of Nigerian crude were selling slowly, some August are still available. Sahara was said to have sold a cargo of mid-September Escravos to Cepsa.

Late-August loading cargoes of Nigerian Qua Iboe were said to have changed hands at a premium of around $1.60 a barrel to dated Brent, but were offered as low as $1.45, traders said. September cargoes of Forcados, Escravos were being offered around dated Brent plus $1.80 a barrel.

About one or two Nemba cargoes were left being shown at dated Brent plus 20-30 cents a barrel but the last trade was heard at a slight discount.

Despite the gloom, the US-China trade war could provide the spark to lift Nigeria’s crude barrels.  US crude exports have slowed in recent weeks, likely because the US-China trade war has reduced flows to China, the single largest buyer of US crude in May. US Energy Information Administration data shows that on a four-week average basis, US crude exports have slowed to 1.87 million b/d during the week that ended July 27 from 2.43 million b/d.

China’s Unipec, the trading arm of state oil major Sinopec, has suspended crude oil imports from the United States due to a growing trade spat between Washington and Beijing.

Also, the US has been unable to persuade China to cut Iranian oil imports dealing a blow to President Donald Trump’s efforts to isolate the Islamic Republic after his withdrawal from the 2015 nuclear accord.

Beijing has, however, agreed not to ramp up purchases of Iranian crude because discussions with China and other countries continue. That would ease concerns that China would work to undermine US efforts to isolate the Islamic Republic by purchasing excess oil.

But Nigeria still have a hurdle. With refinery maintenance season around the corner, US crude inventories could start to rise, especially if exports do not pick up again. West African crude market sources warned that reduced refinery runs would lead to higher US crude exports into Europe competing with Nigerian light sweet crudes.

FRANK UZUEGBUNAM