Nigeria’s crude exports overhang

Nigeria’s crude oil loading schedule for November may face some setback, as about 30 cargoes are awaiting buyers.

This is just as crude premiums to benchmark prices have come down by $1 to $2 a barrel depending on the grade, traders said.

A similar overhang is being reported in Angola’s November schedule too. “This could be the start of things to come,” FGE analyst James Davis said, referring to the weaker West African differentials.

“Globally, demand is tracking sideways from here, and we’re going to see increases in crude supply from non-OPEC. Come January, the market could start looking a bit longer.”

For West African crude demand to pick up again, premiums need to come down further, traders said. Otherwise, prices for oil products to need to rise proportionally, FGE’s Davis said.

Some West African crudes hit multi-month highs in early October. For instance, Nigeria’s Bonga crude was offered at a premium of $9 a barrel to the benchmark dated Brent, while Escravos and Forcados were on offer in excess of $8.

However, freight rates have since jumped and refiners’ profit margins have narrowed, weighing on demand.

As of Tuesday, there were 20-30 cargoes of Nigerian crude left, and about 6-7 cargoes of Angolan crude for November, far more than is typically expected to be left over at this stage of the trading cycle, traders and an analyst told Reuters.

The market is “very, very sluggish,” another trader said. “The market is going down, margins look bad,” said a third.

Angola’s December loading schedule is already out and has yet to find any buyers, as are plans for December loading for some Nigerian grades.

The jump in freight costs followed two developments – the Hamas cross-border attack on Israel on October 7 and the United States on October 12, imposing the first sanctions on owners of tankers carrying Russian oil priced above the G7’s $60 cap.

Key freight rates for crude have jumped, according to LSEG data, including routes from West Africa to demand centres such as China.

Crude oil prices in some of the world’s main physical markets have weakened due to a jump in freight costs and a drop in refining margins, according to traders and LSEG data, suggesting demand weakness that could filter through to the futures market.

Falling prices for physical crude could presage a fall in crude futures, while Brent crude futures have risen above $87 a barrel from the low $70s in June due to OPEC+ supply cuts, and more recently on concern that exports from the Middle East could fall if the conflict in Gaza widens.