Nigeria’s oil sales plummet as Europe’s demand shifts

Nigeria’s oil exports are facing a significant hurdle as a decline in European demand creates a buyer’s market.

This development comes at a time the nation is grappling with oil theft and needs a strong export market to bolster its revenue.

About 20 to 25 shipments of Nigerian crude for April loading are still seeking buyers, according to four traders specialising in the West African market, Bloomberg reports on Friday.Read more

The traders said it is a considerably weaker position than normal for this time of the month — when trade should be moving on to May’s barrels — and the prices the shipments can fetch are plummeting.

The report highlights a confluence of factors causing the slowdown. Strikes in France’s refining sector and seasonal maintenance at European refineries have significantly reduced their capacity to process crude oil. This has led to a surplus of oil and a drop in prices, making it difficult for Nigerian crude to compete.

In addition to the strike’s impact, traders said other plants in Europe are also purchasing less crude because of seasonal maintenance.

“Capacity is offline at some typical destinations for Nigerian crude such as Spain’s San Roque refinery and Italy’s Sarroch plant. Facilities that have halted capacity for work also include Shell Plc’s Pernis refinery near Rotterdam, Europe’s biggest plant,” Bloomberg said.

READ ALSO:Petroleum Minister raises alarm over lack of crude oil for P/Harcourt, Dangote, other refineries

Also, the report said Mediterranean refiners can choose to skip Nigerian supply in favour of “cheap North African barrels that ship more quickly to the region, or they can process some of the large volumes of US West Texas Intermediate crude that have been arriving in Europe in recent months.”

The situation is further compounded by the specific challenge of finding buyers for Nigerian oil. Traditionally, France has been a major importer of Nigerian crude, averaging roughly 110,000 barrels a day over the past year. However, due to the nationwide French strikes and a decline in overall crude imports, this demand has plummeted.

The report cites traders specializing in the West African market who claim that around 20 to 25 shipments of Nigerian crude for April loading are currently struggling to find buyers. This represents a significant deviation from the usual trend, where sales for the following month would typically be underway by this point. The situation is further strained by falling prices for these unsold shipments.

Impact on Nigeria

This struggle to find buyers for its oil could have a negative impact on Nigeria’s economy. The nation relies heavily on oil exports as a major source of revenue for its national budget. A decline in sales volume or price could lead to a significant shortfall in government income.

Looking Ahead

The report doesn’t delve into potential solutions, but some key questions emerge:

• Diversifying Markets: Can Nigeria explore alternative markets for its oil exports to lessen dependence on Europe?
• Negotiating Prices: Will Nigeria be forced to offer steeper discounts to entice buyers in the current market?
• Long-Term Solutions: What long-term strategies can Nigeria implement to minimize the impact of external factors on its oil exports?

The ability of Nigeria to navigate this challenging market situation will be crucial for its economic well-being. Finding new buyers, negotiating favorable prices, and potentially diversifying its export markets could help mitigate the impact of the European demand slowdown.

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