Nigerian crude faces glut as buyers reject cargoes

Indications emerged Thursday that a glut in Nigeria’s oil supply to the international market looms.

A trader said the development comes as ample supply of light and medium grades from the North Sea and the Mediterranean continues to limit buying interest for Nigerian crude.

The Nigerian cargoes, reckoned to be near 50 cargoes, was said to be weighing on the market, while state Angolan oil firm, Sonangol, trimmed its offer of Saxi crude.

Reuters quoted a trader as saying much of the glut could end up heading into the refining systems of major oil companies like Shell and Total, meaning the excess is effectively lower than 50 cargoes.

Market reports said demand for Agbami and Qua Iboe has been higher than demand for other grades so far, while Qua Iboe was being offered at about dated Brent plus $2, steady from its Tuesday levels.

But Sonangol trimmed its offer of Saxi crude to dated Brent plus 50 cents, down 25 cents from Tuesday’s level, a trader said. The company was still offering Dalia at dated Brent minus 70 cents a barrel.

Meanwhile, Angola is set to launch its big oil block as the first vessel that will pump and store oil for its 230,000 barrels per day (bpd) Kaombo project is en route to the West African nation according to operator, Total.

The Kaombo oil block is projected to begin producing its first oil this summer, with the prospect of adding roughly 14 per cent to the OPEC member nation’s average 2017 output of 1.632 million bpd.

The second FPSO, Kaombo Sul, is still in Singapore. The $16 billion offshore project will add a significant amount of oil to the nation’s export at a time when the nation is bound by output limits under a deal orchestrated by the Organization of the Petroleum Exporting Countries.

In September 2017, the Joint Organisation of Petroleum Exporting Countries, OPEC, and non-OPEC Ministerial Monitoring Committee, JMMC, extended the exemption granted Nigeria over the output cut imposed on member countries in January 2017.

At its meeting in Vienna, Austria, the Committee upheld Nigeria’s position that the exemption be sustained until the country’s oil production stabilises.

The extension of the exemption period means more revenue earnings from oil exports by Nigeria, as the country would be able to export all the oil it produces.

Nigeria relies heavily on oil proceeds to fund its capital projects and run its governmental affairs.

A crash in oil prices threw the nation into recession in 2016.

It, however, slipped out of recession in the second quarter of 2017 after an improvement was recorded in the prices of oil in the international market.