BEVERLY HILLS, April 28, (THEWILL) – Nigeria is finding it hard to sell its blend of crude oil even with prices discounted to near $10 a barrel.
The development presents a clear and present danger for the country’s finances and will surely send the 2020 budget into a tailspin. Nigeria depends on crude proceeds to finance more than 80% of its expenditures.
The nation is offering May delivery contracts at a hugely discounted $10 per barrel in some cases even under but traders are not eager to buy because of the global glut in the markets and very weak demand fueled by the deadly coronavirus.
According to a news report on the Bloomberg website, late on Monday, the nation released the prices for most of its crude oil grades for sale in May. The figures reflect an urgent need to offload cargoes in what is a highly competitive marketplace. Even so, traders cautioned that the prices — $10 a barrel or less if the market doesn’t improve — still may not tempt enough buyers because of the demand collapse triggered by the coronavirus.
Worse for Nigeria, it lacks the space to store unwanted supplies at a time the cost of hiring ships to take its supplies to importers has soared because many tankers are being used for floating storage.
Like a lot of oil producing countries, Nigeria sells its crudes at differentials to benchmarks. For the West African country, that marker is Dated Brent, published by S&P Global Plants. The measure stood at $13.62 a barrel on Monday.
Two of Nigeria’s banner grades — Qua Iboe and Bonny Light — will sell at discounts of $3.92 and $3.95 respectively to Dated Brent in May, according to a price list seen by Bloomberg.
Both are more deeply discounted than they were in April, when prices were already staggeringly cheap by historical standards. The majority of the country’s grades will be sold for at least $3 a barrel below the benchmark next month.
Two traders said that the prices still won’t be cheap enough for Nigeria to sell its excess cargoes, a third said the discounts may be attractive enough to lift sales.
The release of the Nigerian official selling prices was about a week late. The country is also running several days late in releasing export loading plans for June.
Nigerian barrels have been selling slowly. Traders estimated that, as of late last week, about 30 out of 65 May-loading cargoes still hadn’t been sold.
Normally just a handful would still be available so late in a month.
THEWILL reports that Nigeria produces about 1.8 million barrels per day mostly through joint venture deals with international and indigenous producers.
*** This report was first published under the caption: Nigeria Struggles To Find Buyers Even As Crude Blend Discounts For $10 Per Barrel.
*** Bloomberg contributed to this report.
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