‘Why demand for Nigeria’s crude is low’
A new report by the New York-based Natural Resource Governance Institute has said that market demand for Nigerian barrels has fallen dramatically due glut of light sweet oil in the Atlantic market, weaker refining margins, the return of more Libyan crude to the market, and the collapse of the US market for Nigerian oil.
According to the report released on Tuesday, most Nigerian crude sells at a premium to Brent, a widely used pricing benchmark, adding that those premiums weakened from around a typical $2.50 per barrel to just 50 cents or less in 2015, and could stay depressed for some time.
It disclosed that the Nigerian National Petroleum Corporation (NNPC) is now regularly left with significant quantities of unsold oil at the end of each month, some of which only can be sold after further price cuts.
Europe and India, which are now the largest markets for Nigeria’s oil, probably have limited growth potential. Crude oil prices has been on the downward swing since last year thereby dropping the oil producing countries.
Crude oil prices fell due to panic selling and growing concerns over the Chinese economic slowdown in the oversupplied crude oil market.
Concerns about an economic slowdown in China, coupled with persistently high production from some of the world’s biggest petroleum suppliers, have soured investor sentiment in recent weeks. Oil prices plunged into a bear market last month and have continued to fall in August.
Specifically, Nigeria Light, sweet crude for September delivery recently rose $1, or 2.2 per cent, to $46.17 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 73 cents, or 1.5 per cent, to $50.25 a barrel on ICE Futures Europe.
Meanwhile, global oil demand will slow in 2016, the International Energy Agency (IEA) said in its latest monthly report, as it warned that the rebalancing of supply and demand in oil markets “has yet to run its course.” “The rebalancing that began when oil markets set off on an initial 60 percent price drop a year ago has yet to run its course,” it said.
Recent developments suggest that the process will extend well into 2016, as shown in our quarterly supply/demand balances for that year.” “A possible Greek exit from European Monetary Union (euro zone) could dampen not only Greek oil product demand, but also potentially curb deliveries across the continent if macro-economic activity were to weaken,” the IEA said.