India and the United States have slashed their imports of Nigerian crude oil by 43 per cent and 53 per cent, respectively, translating to a loss of at least N88bn in earnings, the latest report from the Nigerian National Petroleum Corporation has shown.
India, which became the single largest buyer of Nigerian crude in 2013 after the US, reduced its imports from Nigeria in May this year as it bought 7.74 million barrels, down from 13.51 million barrels in April; 12.51 million barrels in March and 12.70 million barrels in February.
The Asian country had in January imported 16.29 million barrels of Nigerian crude, its highest monthly level this year, the NNPC data showed.
The US, whose imports of Nigerian crude rose by 577.8 per cent in the first quarter of this year compared to the same period of 2015, reduced its import by 5.77 million barrels in May from 10.13 million barrels in the previous month.
In February, the US bought as much as 12.12 million barrels from Nigeria, making it the second largest buyer of the country’s crude after India.
Using a conservative price of $40 per barrel and N197/$ official exchange rate in May, the decrease of 11.14 million barrels in the two countries’ imports of Nigerian crude amounts to N87.9bn.
Global benchmark, Brent crude, had on May 26 hit $50 for the first time in 2016.
The Editorial Director, European and African Oil, Platts, Joel Hanley, in an interview with our correspondent on the sidelines of the Platts’ Lagos Oil Forum, said India “can go anywhere else to buy if the price is right.”
He, however, said, “Nigeria has priced itself to a level where it has regular buyers in India; obviously, there is investment from India that helps that flow. I will say that it is a buyer’s market. India, China and every other buyer have their pick of the grades these days, and that is why differentials are so low. They can pick and choose whatever they want.
“I think right now in this kind of environment, it is about securing a good relationship and a good, reliable trade flow. Trust is so important. And I think if India and Nigeria can focus on that relationship, there shouldn’t be too much threat to that.
“However, if someone comes in at a cheaper price, then I don’t know how long the Indians will stick around because, they, like everyone else, have money to make.”
Three of Nigerian oil grades, Forcados, Qua Iboe and Brass River – have in the past three months been under force majeure – a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.
A number of India-owned refiners have been actively picking up Malaysian oil cargoes for loading in July and August amid growing uncertainty over the exports of Nigeria’s crude grades, according to regional sweet crude traders.
Following the spate of production disruptions largely caused by the recent surge in militant attacks on oil infrastructure in the Niger Delta that cut the nation’s output to the lowest in almost three decades, exports of the commodity from the country have continued to take a serious beating.
Nigeria relies heavily on earning from oil exports, and the recent production disruptions came as an additional headache for an economy that already suffers from the sharp drop in oil prices since 2014.
Weak demand for Nigerian crude oil has caused the number of ships without cargoes to rise to levels not seen in recent times.
As a result, the cost of sending crude oil cargoes from West Africa to Northwest Europe on Suezmaxes has dropped to the lowest level in over 14 years, Platts data has shown.
The continued force majeure on the three grades has substantially reduced the demand for Suezmaxes in the region in recent months, and caused WAF tonnage list to swell to levels rarely seen by veteran market participants.
Suezmaxes are medium to large-sized ships with a deadweight tonnage between 120,000 and 200,000. They are the largest marine vessels that meet the restrictions of the Suez Canal, and are capable of transiting the canal in a laden condition.
According to one shipbroker’s position list, there were 32 ships available prior to the start of the current fixing window, versus a three-month average of 14.8 ships. There were also 29 ships free of cargo, which could make WAF fixing window.
The number of ships means that each cargo that is shown to multiple owners attracts multiple offers and allows charterers to drive freight rates downwards.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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