US oil floods Europe, threatens Nigeria’s exports
Nigeria’s crude oil exports are under pressure as the United States is flooding Europe with a record amount of crude as efforts by the Organisation of Petroleum Exporting Countries to balance the oil market bear fruit.
Russia paired with OPEC last year in cutting oil output jointly by 1.8 million barrels per day, a deal they say has largely rebalanced the market and one that has helped elevate global oil benchmark, Brent crude, close to four-year highs.
Brent, against which Nigeria’s oil is priced, rose by $0.37 to $74.43 per barrel as of 7pm Nigerian time on Monday, compared to around $66 at the start of this year.
Now, the relatively high prices brought about by that pact, coupled with the surging US output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, Reuters quoted traders as saying on Monday.
Nigeria’s oil exports are expected to fall slightly in June to just under 1.8 million bpd, loading plans showed on Monday.
The export plan, comprise 60 cargoes, for a total of 1.796 million bpd, compared with the 1.895 million bpd in May’s revised export programme.
June exports will also include four cargoes of Akpo condensate with 133,000 bpd, compared with three cargoes in May offering 97,000 bpd.
The export plans showed two fewer cargoes of Agbami in June, and one fewer Antan, Bonga, Qua Iboe, EA, Okono, Pennington and Usan compared with the previous month.
Nigerian oil export plans are prone to revisions and delays, with cargoes frequently pushed from one month to the next.
There were still more than a dozen May loading cargoes that had yet to trade, but little fresh spot deals surfaced on Monday.
Differentials for some grades had slipped, traders said, with Qua Iboe discussed at premiums close to $1 per barrel.
“The US oil is on offer everywhere. It puts local grades under a lot of pressure,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude, and has recently started purchasing the US oil.
The US oil output is expected to hit 10.7 million bpd this year, rivalling that of top producers, Russia and Saudi Arabia.
In April, the US supplies to Europe are set to reach an all-time high of roughly 550,000 bpd (around 2.2 million tonnes), according to the Thomson Reuters Eikon trade flows monitor.
In January-April, US supplies jumped four-fold year-on-year to 6.8 million tonnes, or 68 large Aframax tankers, according to the same data.
Trade sources said US flows to Europe would keep rising, with US barrels increasingly finding homes in foreign refineries, often at the expense of oil from OPEC or Russia.
In 2017, Europe took roughly seven per cent of US crude exports, Reuters data showed, but the proportion has already risen to roughly 12 per cent this year.
Top destinations include Britain, Italy and the Netherlands, with traders pointing to large imports by BP, Exxon Mobil and Valero.
Polish refiners, PKN Orlen and Grupa Lotos, and Norway’s Statoil are sampling US grades, while other new buyers are likely, David Wech of Vienna-based JBC Energy consultancy said.
“There are a number of customers who still may test US crude oil,” Wech said.
The gains for US suppliers could come as a welcome development for President Donald Trump, who accused OPEC on Friday of “artificially” boosting oil prices.
While the US lifted its oil export ban in late 2015, the move took time to gain traction among Europe’s traditional refineries, which were slow to diversify away from crude from the North Sea, West Africa and the Caspian.