Nigeria struggling to find buyers for her oil
- 20th May 2021
- Posted by: Hakeem
- Category: Commodities
There are reports that Nigeria has not been able to sell some of its oil. Indian refineries have slowed down buying Nigerian oil as a result of COVID-19.
India is a large buyer of Nigeria’s Agbami, Akpo, Bonny Light and Forcados. According to private sources, there are about 5 shipments of Nigeria Bonny deferred into June (with 2 of them already delayed from April). When cargo is “deferred,” it does not mean that there was some kind of logistical issue, it generally means that no buyers were found.
A source who pleaded anonymity also confirmed that “the problem with the lack of demand for Nigeria’s oil coincides with the fact that the US has been exporting a lot of light crude oil – which competes with Nigeria’s oil.” He further added, “despite the deals Nigeria has with India, the Indian refineries are simply not buying now because of COVID.”
Additionally, because of the demand issues in India, there is a consequent storage concern so most of the refined products are headed to South-East Asia. A local supply and demand imbalance is brewing in this region.
Other reports confirm that sellers of Nigerian crudes are now seeking other buyers in Asia and Europe as India’s COVID-19 situation remains shrouded in uncertainty amid stringent regional lockdowns and sagging domestic consumption.
“Three weeks without [Indian Oil Corp.] weighs dramatically on Nigeria. IOC is the biggest Nigerian grades buyer,” a trader said.
“[IOC] skipped the last decade of June [loading window] and now seems to have skipped July 1-10 also,” according to another source.
According to trading sources, India’s state-owned refiners typically issue tenders for a large proportion of their crude requirements, but with the latest wave of COVID-19 infections in the country still raging, no new tenders have been issued since late April. This has affected West African crude sellers.
Light at the end of the tunnel
There is a possibility that demand can come from Indonesia, Taiwan or Thailand.
According to a report, there is an opportunity for low-cost Nigerian crude that is likely to seem attractive to refiners in Thailand who also need their share of sweet crude for refinery processing.
That demand could help clear unsold June-loading cargoes, with traders estimating around 25-28 Nigerian cargoes unsold in the month as the July trading cycle looms.
Hopefully, demand from Europe increases as well because currently, WTI light crude dominates the European market and Nigerian oil is priced out of it.
Nigeria needs oil money as it represents a large part of its earnings.