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But
steady Indian and Indonesian demand has helped lift price
indications for two of Nigeria's top grades to near five-year
highs, according to traders and shipping data.
"It's only because India's economy has been growing, and to a
lesser extent Indonesia, that there remains decent demand for
Nigerian crude. Without those two countries, the European buyers
would have dragged the market much lower," one seller said.
A projected rise in buying from European refineries, which
supply fuel to the United States, is offering some support for
now. Light Nigerian oil is easily processed into higher octane
gasoline increasingly used in the United States, where the
summer driving season looms.
As a result, sellers of Bonny Light and Qua Iboe crude are
offering at and above a premium of $2.00 a barrel compared to
dated Brent, the benchmark North Sea crude.
(Graphic: Nigerian crude offered near five-year highs - https://tmsnrt.rs/2I0p4p0)
But European refiners are also driving a hard bargain, balking
at higher Nigerian prices when one trader said the market was
flooded by "a sea of cheap U.S. oil."
"We have many options that mean Nigerian won't work for us at
these prices," another trader said, adding that in addition to
U.S. oil, European refiners could turn to North Sea and Caspian
Pipeline Consortium (CPC) crudes.
CPC oil "costs us 50 cents less a barrel compared to the prices
being asked for Nigerian, given the freight costs and market
structure," he said.
Sellers of Nigerian crude are still learning to live with the
surge in U.S. shale output, which has turned the United States
into the world's top crude producer and dampened demand for
imports in what had been a reliable market for Nigeria.
"Nigerian crude has taken a beating for the last 10 years ever
since the U.S. scaled back buying," the seller added.
Nigerian exports of crude and petroleum products to the United
States plunged from 36.4 million barrels in July 2010 to just
5.6 million barrels in January 2019, according to the U.S.
Energy Information Administration.
(Graphic: U.S. Imports of Nigerian Crude - https://tmsnrt.rs/2Vnk1SA)
After Washington lifted a four-decade ban on exports of U.S. oil
in 2015, shipments to Europe hit an all-time high of 25 million
barrels in March 2019 from just 2 million barrels in February
2016, Refinitiv Eikon data showed.
This has put a squeeze on a prime Nigerian market.
U.S. oil is also heading to India, where it is increasingly
competing with Nigerian crude. Indian Oil Corp, the country's
top refiner, signed its first annual deal to buy U.S. oil in
February, paying about $1.5 billion for 60,000 barrels a day up
to March 2020.
Despite the pressure from U.S. barrels, Nigerian exports to
Europe, India and Indonesia have held generally steady so far.
Consistent tenders from state buyers in India and Indonesia
ensure these remain major destinations for Nigerian oil.
But one Asian buyer said Indian tenders were largely finished
for the month, and that Nigerian cargoes for April and May would
soon need to find buyers in Europe instead.
"Nigerian is facing stiff competition almost everywhere," a
trading source said. "Sooner or later Nigerian oil is going to
need to expand into new markets."
(Reporting By Noah Browning; Editing by Edmund Blair)
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