The restive situation in the region may lead to a further
drop in crude oil export as major refineries across the
globe have concluded plans to stop the purchase of the
commodity from Nigeria due to rising uncertainties about
the country meeting up with deliveries.
This is arising from the fact that a number of oil
companies in Nigeria had declared force majeure of
crude oil export, while a few others had been forced to
suspend or cut production as a result of the bombing of
oil facilities across the Niger Delta.
According to data obtained from Reuters , four of
Nigeria’s oil grades, including the largest stream, Qua
Iboe, have been under force majeure over the last one
month.
Force majeure is a legal clause that allows companies to
cancel or delay deliveries due to unforeseen
circumstances.
The report stated that despite the fact that ExxonMobil,
which declared force majeure on Qua Iboe in May due to
an accident, lifted the declaration last week, the
unpredictability is too much for some buyers.
The report further stated that refineries on the United
States’ east coast were beginning to turn away from
Nigerian crude oil, noting that these same refineries had
been on a buying spree for Nigerian crude in recent
months that averaged 240,000 barrels per day (bpd) in
April and May.
As a result, the report said differentials to dated Brent for
Qua Iboe, Bonny Light and other grades were under
downward pressure, adding that there were several
unsold cargoes for June loading.
According to the report, the reduced demand means
Nigeria is not benefiting as much as others from a
rebound in Brent crude prices at current rate of over $51,
which is partly driven by its own oil outages, stating that
the reluctance of the refineries to buy Nigeria’s crude oil
was limiting the prices Nigeria could get for its oil, even
as there was less of it.
Specifically, the report stated that India’s HPCL was
forced last month to cancel a vessel it chartered to carry
two million barrels of West African crude due to the Qua
Iboe force majeure , while India’s state-run Indian Oil
Corporation Limited, a major buyer of Nigerian grades
over the past year, had stated in its recent tenders that it
would not take grades under force majeure , with Qua
Iboe remaining off the list of the company.
Indonesia’s Pertamina, another frequent buyer, the report
added, had also chosen not to buy Nigerian grades in its
recent tenders, favouring Congolese Coco, Angolan
Girassol and Saharan Blend from Algeria instead.
The report quoted oil traders as saying that Pertamina
had shifted its preferences since the violence and
uncertainty escalated, while Senior Vice President of the
company, Daniel Purba, said the company was monitoring
Nigeria, but noted that the situation was still currently not
affecting crude purchasing.
Commenting on the development, one oil trader on the
US east coast said: “When you plan your crude run
months in advance and commit buying cargo, you need
to be comfortable that the cargo will be there when you
go to lift.”
Similarly, Elizabeth Donnelley, Assistant Head of the
Africa Programme at Chatham House, said: “The nature
of the recently re-emerged militancy in the Niger Delta
suggests it is here to stay for the foreseeable future.”
Also speaking, Olivier Jakob, Managing Director of
PetroMatrix in Switzerland, said “not everybody wants to
be caught up in that, so they will avoid it. The refineries
will walk away from it.”
In a similar development, senior economist at Japan Oil,
Gas and Metals National Corp, Takayuki Nogami,
lamented, yesterday, that the recent fall in the Japanese
oil market was a result of supply disruptions in Nigeria
and Canada, following the Niger Delta militant activities.
Nogami, in a statement, pointed out that the Japanese
economy was on the double at the first quarter and was
slow on consumer spending and weak exports which it
experienced lately.
According to the statement, a downturn in the US crude
inventories was noticed as the company expressed
concern over attacks on Nigeria’s oil industry.
