Nigeria Grapples with Overstocked Crude Oil Cargoes for November

The November oil-loading schedule for Nigeria faces uncertainty as approximately 30 cargoes await buyers.

This situation has coincided with a decline in crude premiums compared to benchmark prices, a drop of $1 to $2 per barrel depending on the grade.

This challenge is not unique to Nigeria, as Angola’s November schedule also reports a similar overhang.

Analysts have started to observe weaker West African differentials, and this situation could signal a broader trend.

They anticipate that the oil market may face increased supply from non-OPEC countries, which could lead to longer market conditions by January.

To revive demand for West African crude, traders suggest that premiums should further decrease. Alternatively, prices for oil products must rise proportionally.

Earlier in October, certain West African crudes, like Nigeria’s Bonga, were offered at a premium of $9 per barrel compared to the benchmark dated Brent. Escravos and Forcados were similarly in excess of $8.

However, the market dynamics have since shifted. Freight rates have surged, while refiners’ profit margins have narrowed, contributing to weakening demand.

As of now, there are roughly 20–30 cargoes of Nigerian crude and 6-7 cargoes of Angolan crude remaining for November. This is significantly higher than usual at this stage of the trading cycle, indicating a sluggish market.

Notably, the increase in freight costs was triggered by two key events: a cross-border attack by Hamas on Israel in early October and the imposition of sanctions by the United States on tankers carrying Russian oil priced above the G7’s $60 cap.

These developments have led to increased freight rates, particularly for routes from West Africa to major demand centres like China.

While Brent crude futures have risen to over $87 per barrel from the low $70s in June, primarily due to OPEC+ supply cuts and concerns about the Gaza conflict, falling prices for physical crude could hint at potential downward pressure on crude futures.

The market appears to be responding to a combination of rising freight costs and diminishing refining margins, reflecting a possible weakening of demand in the oil industry.

Source: The Guardian Newspaper