AS Nigeria continues to look for buyers of its crude oil, the Nigerian National Petroleum Corporation, NNPC, has reduced the prices of the country’s crude oil grades Bonny Light and Qua Iboe to their lowest points in over a decade. The decline, according to reports, was due to declining demand for the country’s crude oil in the international market.
The action, according to oil traders, was engendered by the need for the country to join in the fight for market share. Specifically, the NNPC in a statement said it will sell July supplies of Bonny Light crude at 23 cents more than Dated Brent. This, according to oil trading sources, was the smallest differential since 2005 and compares with a 50 cent premium in June and $2.55 a year earlier. The NNPC also lowered the official selling price for Nigeria’s largest crude oil stream, Qua Iboe, to dated Brent plus 35 cents per barrel, the lowest differential since May 2005.
Dated Brent is a market term for a cargo of North Sea Brent blend crude oil that has been assigned a date when it will be loaded onto a tanker. Cargoes that have been assigned loading dates are referred to as dated cargoes, wet cargoes or wet barrels. Dated Brent prices are used, directly and indirectly, as a benchmark for a large proportion of the crude oil that is traded internationally.
The drop follows North Sea crude, which hit a 10-year low earlier this week as all Atlantic Basin sellers, particularly those with light, sweet oil, struggle to place cargoes. Rising output from US shale formations had over the last couple of months contributed to a market glut that drove crude down almost 50 percent last year, roiling global markets as producer nations lost revenue and foreign-exchange reserves.
Data obtained from Bloomberg showed that horizontal drilling and hydraulic fracturing, or tracking, that unlocked supplies in shale formations in North Dakota, Texas and other states has boosted US output to the highest in more than three decades, forcing overseas producers, whose exports to the US are shrinking, to find new markets for their crude.
The report noted that the US has bought an average 30,000 barrels a day of Nigerian crude this year, shipping almost one million barrels a day from the country in 2010.
In addition, the US Energy Information Administration noted that w hile the United States once absorbed more than a third of Nigeria’s nearly two million barrels per day (bpd) of exports, this slumped to close to 60,000 barrels per day on average for the first three months of this year.
— Jun 22, 2015 @ 15:15 GMT