Cheap Alternative Supplies Push Brent Below $60 as West African Cargoes Pile Up
Approximately 20 million barrels of Nigerian crude oil scheduled for December and January loading remained unsold as of Thursday, highlighting growing pressure on West African crude amid a surplus in the global oil market.
According to a Reuters report citing two traders, the unsold cargoes reflect intense competition from cheaper and more readily available alternative supplies, which has dampened demand for Nigerian grades.
Market Oversupply Weighs on Prices
Analysts say the difficulty in placing Nigerian crude is part of a broader global supply overhang, which has triggered selling in international futures markets and pushed Brent crude below $60 per barrel, its lowest level since May.
“The overhang of West African cargoes partly reflects the broader global crude supply surplus emerging in the first quarter,” said Victoria Grabenwoger, an analyst at Kpler, as quoted by Reuters.
Angolan Cargoes Add to Pressure
Nigeria is not alone in facing weak demand. Angola’s December and January programmes reportedly still have five to six cargoes available, further weighing on market sentiment.
The surplus has slowed the start of trading for February-loading cargoes, even though Angola has already released its loading schedule and term nominations.
Traders noted that such a large volume of unsold oil is unusual at this stage of the trading cycle, which typically moves up to two months ahead for West African grades.
China, India Shift Buying Patterns
Reuters estimates that combined unsold cargoes from Nigeria and Angola reached as much as 40 million barrels earlier in the week.
OilX analyst Francisco Gutierrez attributed the sluggish demand partly to seasonal factors and partly to changes in global buying behaviour.
He said Angolan January trade is running about 20 percent behind its long-term average, as China the world’s largest commodities buyer, increasingly turns to cheaper or closer alternative crude grades.
Middle East, Americas Displace West African Crude
Lower official selling prices and shorter shipping times have made Middle Eastern crudes more attractive in Asia, displacing medium and heavy West African grades.
At the same time, India’s continued strong imports of Russian oil, despite tighter Western sanctions, have crowded out medium-heavy West African barrels.
Light to medium West African grades are also facing stiff competition from Argentine and Brazilian supplies, according to traders.
Dangote Refinery Reduces Nigerian Crude Intake
Nigeria has been forced to market additional barrels following reduced crude intake by the 650,000 barrels-per-day Dangote Refinery, which is scheduled to undergo maintenance in January, Grabenwoger added.
The combination of weaker demand, rising global supply and shifting trade flows continues to weigh heavily on Nigeria’s crude exports.
About the Author
