- OPEC to rollover output cut deal
Ejiofor Alike with agency reports
Nigeria is set to export highest volume of crude oil to Europe in June following production outages being experienced by producers in the UK’s North Sea oilfields, according to oil traders.
This is coming as the Organisation of Petroleum Exporting Countries (OPEC) is expected to roll over a deal on cutting crude supplies at a meeting next week and discuss deepening the production curbs that have been in place since January 1, 2019.
Reuters reported that Nigeria is set to export about 905,000 barrels per day (bpd) to the continent this month, the most since a roughly five-year high of about one million bpd in November, 2018.
Nigeria’s exports to Europe hit a five-year high of one million barrels per day in November 2018 but slumped to 677,000 – 700,000 barrels per day in the last seven months.
Norwegian and UK offshore fields in the North Sea normally provide a steady supply of lighter crude to refineries feeding northern Europe’s major economies and are traditionally more competitive than Nigerian grades due to their proximity.
But planned maintenance on Norway’s Ekofisk oilfields this month slashed exports to just one cargo from the usual 10-15.
Also, Flotta, another of the 12 North Sea fields, was said to be closed for repairs over two weeks in late May.
Supply of the five North Sea crude grades that underpin the dated Nigeria’s Brent benchmark is set to fall to around 720,000 bpd in June, from 948,000 bpd the month before.
The contamination of a pipeline carrying Russian Urals crude in April interrupted flows to central and eastern Europe for a month and left stocks in need of replenishment.
Higher volumes to Europe have provided an unexpected boon, with Nigerian exports to the United States on the wane for a decade due to increased US shale oil production, and demand relatively steady in Nigeria’s key markets India and Indonesia.
“(Europe) always tends to act as the clearing house at lower value than the East,” one trader selling Nigerian crude said.
Though European gasoline margins have been middling and especially poor among southern European refiners, several factors may mesh in coming months to support Nigerian differentials, which stand near multi-year highs.
Traders said the possibility of a permanent shutdown to the fire-stricken Philadelphia Energy Solutions refinery in the city, though it was a consistent importer of Nigerian crude, would increase demand for gasoline refined in Europe.
Nigeria’s Egina, heavy sweet crude from a new offshore field, has proved consistently popular among refiners in northwest Europe.
OPEC to Rollover Crude Oil Output Cut Deal
Meanwhile, OPEC is to roll over a deal on cutting crude supplies at a meeting next week and discuss deepening the curbs that have been in place since January 1, 2019.
A deal between OPEC and allies, including Russia, to curb oil output by 1.2 million barrels runs out at the end of June.
With the expiration of the agreement this week, the group has scheduled meetings from July 1-2 in Vienna, Austria to discuss the next steps.
However, Iraq’s Oil Minister, Thamer Ghadhban, has said the group would extend the current deal and consider deeper production cuts.
He said the issue would be discussed in Vienna but declined to specify what alternative level of cuts were being suggested.
“The rollover at least would be at the same level because it has not been very effective, it has been effective to a certain level to minimise the glut in the market, but there are now ideas or calls for agreeing (on) even more,” Ghadhban said on the sidelines of the CWC Iraq Petroleum Conference in London.
Reuters reported that Algeria had floated an idea of deepening the cut by some 600,000 bpd, to make it 1.8 million barrels per day.
Oil prices hit their highest in about a month on Wednesday, buoyed by United States government data that showed a larger-than-expected drawdown in crude stocks as exports hit a record high, and surprise drops in refined product stockpiles.
The price of the global benchmark, Brent crude, which dropped to $65 per barrel yesterday, had risen $1.44, or 2.2 per cent to settle at $66.49 a barrel on Wednesday, while the US West Texas Intermediate (WTI) crude futures rose $1.55, or 2.7 per cent, to settle at $59.38 a barrel.
The product drawdown comes at the same time as news that the largest and oldest refinery on the US East Coast would be shut after a massive fire last week caused substantial damage.
According to agency reports, Philadelphia Energy Solutions plans to shut down the 335,000 bpd refinery complex next month.
The crude inventory fall and refinery outage added to uncertainty over oil supplies created by the war of words between Washington and Tehran.
This has prompted fears that oil shipments through the Strait of Hormuz, the world’s busiest oil supply route, could be disrupted.
Asked if a war was brewing, US President Donald Trump told Fox Business Network on Wednesday: “I hope we don’t but we are in a very strong position if something should happen.”
Tehran has condemned a fresh round of US sanctions, describing it as “mentally retarded.”
But the US Special Representative on Iran, Brian Hook, told Reuters in an interview yesterday that the United States’ policy of maximum economic pressure on Tehran was working.
“We are dedicated to this policy of maximum economic pressure because it is working, it is denying the regime historic levels of revenue,” Hook said.
Hook was speaking before a meeting with senior French, British and German diplomats in Paris to convince them that the US policy was the best way to get Iran back to the negotiating table.
Bilateral tensions spiked anew after Iran shot down a US drone last week in the Gulf.
Relations have been tense since Washington blamed attacks on oil tankers just outside the Gulf on Iran, while Tehran has denied any role.
In the search for a longer-term direction, the oil markets will watch the G20 meeting this weekend followed by a meeting of the OPEC and non-OPEC producers, a group known as OPEC+, taking place from July 1-2, to discuss extending output cuts for the second half of this year.