Tight competition depresses West African light sweet crude in European market

West African light sweet crude oil grades are in tight competition with the North Sea and Mediterranean grades in European market prompting a fall to multi-month lows. Key light sweet crude grades from West Africa such as Agbami, Akpo, Ekofisk and Saharan Blend have weakened over the course of the week, with traders reporting that a relative oversupply was causing sellers to discount these grades to clear into refinery homes.

Light sweet Nigerian grades Agbami and Akpo were hovering above three-month lows amid an overhang of unsold November cargoes. The price of Nigeria’s sweet crude fell to $46.32 per barrel against $47.17 a barrel. Also, the global benchmark, Brent crude oil fell from $50.54 per barrel to $48.58 a barrel. The latest crude oil price is still below the Federal Government budget benchmark of N53 per barrel.

Light sweet gasoline-rich North Sea grade Ekofisk dipped to a four-month low of Dated Brent minus minus 20 cents/b Thursday as the outlook for the December North Sea trading cycle turned bearish.

“Refiners are spoilt for choice of alternative cheap grades across the whole spectrum of sour and sweet grades,” analysts say.

Upsurge in December loading programme

The North Sea December loading program is the highest in over two years, at 54 cargoes or 32.4 million barrels. The Ekofisk December loading program stands at 17 cargoes, five cargoes longer than November’s following the deferral of three cross-month cargoes into December.

Nigeria is expected to export at least 56.29 million barrels of oil in December. This is according to provisional loading programmes, which translate this figure to 1.82 million barrels per day, mb/d. Analysts say the outlook for Nigeria’s crude looks bleak. Underscoring this fear is the fact that 19 million barrels of the country’s November loading remained stranded in the market as at the last week of October.

Nigeria’s December export volume compared with November’s export plan of 56.66 million barrels of oil, or 1.89 million bpd. But traders said more cargoes were likely to be added, with a possible total of nine Forcados cargoes.

Recent reports indicate that surplus cargoes of Nigerian crude oil were slow to clear on the international market, even as Chinese buying helped Angola to fare better, traders said. About 19 million barrels of November loading Nigerian oil are struggling to find buyers as Asian refiners start looking further ahead and Europe turned to the closer, and increasingly cheap, North Sea and Mediterranean grades.

Nigeria to sell, buy oil directly

Nigeria will start selling and buying oil and gasoline directly to cut out middlemen and curb graft, the Nigerian National Petroleum Corporation (NNPC) announced coming about 18 days after opening the technical bids submitted by 101 companies for consideration in its crude oil Offshore Processing Agreement (OPA).

The NNPC disclosed that it had abandoned the OPA arrangement and opted for Direct Sale-Direct Purchase (DSDP) of crude oil and products with identified refineries. Analysts say the policy shift fits new President Muhammadu Buhari’s plan to halt corruption endemic in the industry.

Ohi Alegbe, NNPC spokesman, in a statement said the decision was made after a screening of previously used and prequalified petroleum product importers revealed almost all the 34 international and 10 local companies were middleman businesses.

The shift is “a major steer designed to enshrine transparency and eliminate the activities of middlemen in the crude oil exchange,” said the statement.

Meanwhile, the outgoing Executive Secretary, Nigerian Extractive Industries Transparency Initiative (NEITI) and Minister designate, Zainab Ahmed said that the reduction of crude oil allocation to the Nigerian National Petroleum Corporation (NNPC) will save the country huge revenue and block leakages.

Speaking at her valedictory ceremony at the NEITI head office, Ahmed said that of all the crude allocated to domestic refineries, not more than 28 per cent is utilized, while about 35 per cent is exported. The revenue from the exported crude, according to her, is spent on financing the operations of the NNPC.

Ahmed argued that if the Federal Government pruned the crude allocation to the NNPC, the corporation would be compelled to seek other means of financing and become more efficient.

FRANK UZUEGBUNAM