Nigeria poised for increased share of global oil market
Lagos -- An increased volume of Nigeria's crude oil is expected to enter the international oil market this second half of the year, going by information available to SweetcrudeReports.
Outages at North Sea oilfields have helped put competing Nigerian oil on pace to arrive in Europe at the highest levels in seven months while export of Nigeria’s crude grade Qua Iboe is expected to witness an increase in August, up to 9 cargoes, according to Refinitiv Eikon data and traders.
Increased crude oil export from the country is supported by rising output engendered by peace and stability in the oil-producing Niger Delta. Going by the calculations of the Nigerian National Petroleum Corporation, NNPC, the nation's oil production has currently risen to 2.3 million
barrels per day, bpd, up from 2.1 million bpd as at the end of last year.
Nigeria’s oil export to Europe was at the highest levels in seven months in June at 905,000 barrels per day, bpd, the most since almost five-year peak of about 1 million bpd in November.
August exports of four main Nigerian crude grades were set to rise 155,000 bpd from July according to preliminary programmes.
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, led by the sweet Bonny Light, due to their proximity.
But, planned maintenance on Norway’s Ekofisk oilfields last month slashed exports to just one cargo from the usual 10-15. Flotta, another of the 12 North Sea fields, closed for repairs over two weeks in late May.
Likewise, the possibility of a permanent shutdown to the Philadelphia Energy Solutions refinery may stand to also benefit Nigerian crude as U.S. gasoline demand rises.
Demand for Nigeria’s crude by the U.S had been on a low side since shale boom. “Nigerian grades are normally middle-distillaterich and with Ekofisk having undergone maintenance, Nigeria is meeting European demand for this type of crude,” said Ehsan Ul-Haq, lead analyst for oil research and forecasts at Refinitiv quoted by Reuters.
Supply of the five North Sea crude grades that underpin the dated 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 Nigeria an unexpected benefit, with the country's exports to the United States on the wane for a decade due to increased U.S. 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.
Egina, a heavy sweet crude from a Nigerian new offshore field, has proved consistently popular among refiners in northwest Europe.
“Exports of the grade primarily go to Europe, specifically the Netherlands and France, which combined took around 155,000 bpd in May, or 83% of the grade’s exports,” said Mercedes McKay, analyst at energy consultancy FGE.
Heavier grades could also benefit, with comparable Venezuelan and Iranian crude pushed off the market by U.S. sanctions and ahead of a January switch to less-polluting marine fuels under new International Maritime Organisation, IMO, standards.
“(Even if) margins are bad, European refiners think they can profit from distillate demand for the 2020 bunker fuel change,” Refinitiv’s Ul-Haq said.
Data from Refinitiv Eikon show that export of Nigeria’s crude grade Qua Iboe will witness an increase in August, up to 9 cargoes, according to the data.
The increase is expected to happen because schedules for export loading, which started to be issued on Monday, June 24, point to more demand of the crude grade from buyers. Due to stronger demand from Northwest Europe, nine cargoes of the grade will be exported in August, up from 6 planned in July, it was gathered.
By mid-June, at least 20 cargoes were yet to be claimed from the July schedule, but most of these were expected to be taken up. Qua Iboe for July loading was last offered at dated Brent plus $2.80 a barrel, the highest differential since mid-2014.
The Qua Iboe crude oil is produced by ExxonMobil from numerous offshore fields in the Bight of Biafra in southeastern Nigeria, east of the Oso field. The crude, from fields 20 to 40 miles offshore from Nigeria's South Eastern region, are brought to shore via a seabed pipeline system to the Qua Iboe Terminal, QIT, in Ibeno, Akwa Ibom State. Production averages approximately 320,000 barrels per day. ExxonMobil, as field operator, holds 40 percent interest in the field production mix with the NNPC holding the balance 60 percent.