A monitored report suggests that Nigeria has reduced the official selling prices for its crude oil to an all-time low so as to clear an inventory of unsold April-loading cargoes before releasing the programme for May on Monday.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari disclosed recently that Nigeria was already struggling to find buyers for its crude oil as over 50 cargoes that were yet to be sold.
The NNPC boss said that the lower demand of crude oil globally was compounded by the activities of Russia and some fellow OPEC members like Saudi Arabia and Iraq, which could afford to offer discounted prices of between $5 and $8 per barrel to buyers. This had led to Nigeria’s crude oil cargoes getting stranded due to its higher selling prices.
According to S&P Global Platts, these unsold cargoes represent over 70% of the country’s total oil exports and thereby having serious negative impact on the country’s foreign exchange earnings and its revenue.
It must be noted that the unprecedented excess of crude oil and low demand were triggered by the Coronavirus outbreak and a price war between Saudi Arabia and Russia for market share.
Consequently, the NNPC, reduced its April official selling prices for Bonny Light and Qua Iboe by $5 per barrel and Brent by $3.29, Reuters reported on Monday.
Brent crude, the international benchmark, has crashed by over 60% since the start of this year. It sold for $26.44 per barrel as at 7:40 pm on Monday.
Reuters’ report on Monday, said that the key grades had increases in May loading programmes when compared with the previous month.
Bonny Light and Forcados are both higher and due to load 245,000 barrels per day, Bonga 123,000 bpd and Qua Iboe 215,000 bpd.
There will also be two cargoes each of Usan and Yoho, five cargoes each of Brass River and Agbami, six of Egina and four Amenam, according to the report.
Meanwhile, Vitol, the world’s largest independent oil trader, has suggested that the global oil demand would soon plunge by more than 10% from the typical 100 million barrels per day consumption, as the coronavirus pandemic otherwise known as COVID-19 forces countries into lockdown.
According to the Head of Research at Vitol, Giovanni Serio, a 10% drop in the United States demand would mean a 2 million bpd loss in consumption. Currently, an Italy-style lockdown in the United States is not Vitol’s base case, but if COVID-19 infections spiral out of control, there could be drastic measures coming that would destroy a lot of oil demand.
He said that California, for example, is already under lockdown, after ordering on Thursday its 40 million residents to stay at home unless they have an essential reason to go out.
Lockdown in UK, Italy, France and Spain Europe has seen reduction oil demand, just as German traffic has reduced by 40%.
However, on a positive demand note, activity in China is resuming and Beijing is a major beneficiary of the crumbling oil prices, according to Serio. While China recovers from a demand slump, it is not certain that if a Chinese buying spree of cheap crude oil could sustain the heavily depressed market for long.