- West African crude differentials started to slip on Thursday as a large overhang of Nigerian cargoes and high freight costs started to weigh on sentiment.
- Differentials of Nigerian crude are still well up from multi year lows set in the summer, supported by demand from Europe and South America, with October cargoes selling relatively quickly.
- However, high freight costs have contributed to relatively slow November sales, with more than 40 of 63 cargoes for the month still available less than two weeks before December cargoes come to market.
- A higher premium of Brent to Dubai DUB-EFS-1M is also limiting trade of West African cargoes, as they become expensive relative to Middle Eastern vessels.
- Lower refinery margins in Europe were also seen as choking off demand for West African barrels, traders said.
“With freight high, (refinery) margins coming off slowly but surely, it can’t be otherwise,” a trader said in response to a question on whether he saw differentials declining.