High Profits Boost Foreign Refineries’ Scramble for Nigerian Crude

0

Ejiofor Alike with agency reports

Shortage of certain grades of crude oil in the international market following production cuts by the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC, coupled with booming refinery profits, have forced foreign refineries in the United States and Asia to scramble for cargoes of Nigerian crude.

This latest development is in contrast to recent months when the loading of cargoes of Nigerian crude had lingered after the programmes were issued by the producing companies.

At the peak of the militant attacks on oil and gas infrastructure in the Niger Delta in 2016, which led to the declaration of force majeure by the international oil companies (IOCs) on four Nigerian grades of crude oil, supply disruptions had created delivery uncertainties that forced crude buyers in India and the United States to shun Nigerian crude.

For instance, India’s Hindustan Petroleum Corporation Limited had cancelled a vessel it chartered to carry two million barrels of Nigeria’s Qua Iboe following the force majeure declared by ExxonMobil on the exports of this grade of crude oil.

ExxonMobil had declared the force majeure on Qua Iboe after a drilling rig working for another oil company damaged its pipelines.

The development had prompted the state-run Indian Oil Corporation Limited, which is a major buyer of Nigerian grades to cancel the tender for Qua Iboe.

Also, Indonesia’s Pertamina, which is also a buyer of Nigerian crude, shunned the Nigerian grades and opted for Congolese Coco, Angolan Girasol and Saharan Blend from Algeria.

Pertamina had said it shifted its preferences as a result of the violence in the Niger Delta, which made the delivery of Nigerian cargoes uncertain.

The Senior Vice-President of ISC Pertamina, Daniel Purba, had told Reuters that the firm was “monitoring” Nigeria, but “currently it’s still not affecting crude purchasing”.

However, Reuters has reported that the booming refinery profits are helping Nigerian oil producers sell cargoes quickly, aided by the crisis in Venezuela, and the shortage of certain types of crude amid OPEC production cuts.

Competition among buyers has boosted offers for Nigeria’s Forcados grade to as much as $1.70 above dated Brent, while offer levels climbed for nearly all other Nigerian grades.

Crude buyers are said to be keen on buying Nigerian crude partly due to strong profits for sulphur-rich fuel oil, which is boosting demand for Nigerian oil.

Nigerian crude has lower sulphur content and produces more fuels such as gasoline.

Though light crudes suffered because most production additions this year, from US shale, Libya and Nigeria, were light crude, the shortage of certain grades as a result of OPEC cuts led some buyers to shift to light oil.
According to reports, the long-suffering Nigerian grades are finding keen buyers in the United States and Asia as refineries run full steam on strong margins.

While the United States refinery margins were said to have rallied to a two-year high on Tuesday, Europe’s refinery runs were also said to be on track for a six-year high for August before Europe’s largest oil refinery went into an unplanned shutdown over the weekend.