Nigerian crude oil for April loading has been slow to sell, with offer levels providing little value compared with rival grades from the Mediterranean, North Sea and Latin America.
“I have not heard anything trade. It looks very quiet,” S&P Global Platts quoted one crude trader as saying, while another said, “Buyers have pulled back quite a bit and we may be in for a bit of a waiting game on the Nigerian front.”
“Northwest European buyers might consider West African grades to be on the expensive side. The structure is not helping a lot,” a third crude trader said. “The North Sea has come off a bit, so competition for Nigerian grades is stronger. Just on an economic perspective, people will swing away from West African crude. Current linear
programming runs would signal that as well.”
Linear programming is a model used in refinery planning and scheduling in regards to what grades to select to optimise refinery runs and yields.
North Sea BFOE grades – Brent, Forties, Oseberg and Ekofisk – saw significant downward movement last week, weighed on in part by large arrivals of US crude into Europe while Chinese buying eased, sources said.
The Dated Brent differential was assessed at minus 56.5 cents per barrel on Tuesday, down 1 cent per barrel day on day.
The Brent and Forties blend values flipped into negative territory versus Dated Brent in the last decade of February as buying interest vanished to give way to competitive selling activity in the Platts Market on Close assessment process.
Some traders, however, were not expecting North Sea crude to displace West African grades just yet, with one trader saying the distillate yield of West African crudes would keep them competitive.
High freight costs into Europe were another factor pressuring Nigerian crudes. Although Suezmax freight rates has fallen since peaking at multi-year highs late November, freight rates were still higher year on year. The West Africa to UK Continent trip was assessed at $10.11 per metric tonne on Tuesday, according to S&P Global Platts data,
compared with $6.95/mt on March 5, 2018.
“March [Nigerian value] was over-hyped and there appear to be pressures on competing Mediterranean grades that will affect Nigerian [April crude]. Urals, CPC, Sahara, and Libyan…especially as El Sharara is expected to be back,” a market source said.
In the Mediterranean, Kazakhstan’s CPC Blend and Algeria’s Saharan Blend, both light, naphtha-rich grades, have remained near three-month lows in recent sessions amid weak gasoline and naphtha cracks and, more recently, the restart of output from Libya’s Sharara field after force majeure, which had been in place for almost three months, was
“CPC is the most economic grade at the moment in the Med [in terms of cracking margins],” one crude trader said.
CPC Blend was assessed Tuesday at a discount of $1.95 per barrel to the Mediterranean Dated Strip and Saharan Blend at a discount of Dated Brent minus 5 cents per barrel to the Mediterranean Dated Brent strip.
Elsewhere, US imports of Nigerian crude have been sharply lower year on year of late.
US Energy Information Administration data showed imports averaged 29,000 barrels per day in the four weeks to February 22, versus 308,000 bpd in the 2018 period.
“With the USAC Philadelphia refiners now largely pulled out of WAF light sweet, the majority of the remaining Nigerian will be dependent on clearing in the prompter European market,” a crude oil trader said.
US refineries have increased their intake of waterborne US domestic crude from the US Gulf coast, as well as some via rail tankers, he said.