Key highlights
- Nigerian crude revenues could drop due to France’s strike action and Brent crude price drop projections.
- France is Nigeria’s third-largest export destination for crude oil.
- 20-25 shipments of Nigerian crude for April loading are still looking for buyers, potentially leading to a drop in shipment prices.
- JP Morgan Global Head of Energy Strategy predicts Brent crude could drop as low as $60 per barrel, which could reduce Nigeria’s oil revenues.
Nigeria’s crude revenues could see a drop in the near term due to two major factors – France’s strike action which has impacted refineries and Brent Crude price drop projections.
French Unions have been on strike and protesting over plans by the government to raise the pension age from 62 to 64. The protests have grounded road, rail, and air services affected.
Over the weekend, Bloomberg reported that between 20 and 25 shipments of Nigerian crude for April loading were still searching for buyers, which could result in a drop in shipment prices. This is according to statements from West African market crude traders.
Bloomberg reports that each cargo was about a million barrels of crude, and this is a weak position for the crude producer to be in because, at this time, trade should be moving on to May’s barrels.
Data from the National Bureau of Statistics indicate France is Nigeria’s 4th largest crude oil export destination with about N498 billion of trade deals recorded in Q4 2022. Included in the about is about N441 billion making the country Nigeria’s third largest crude oil export destination.
The French protests have impacted the crude oil trade as refineries have shut down across the country. The country’s overall crude imports dropped by half in March 2023 and are projected to drop in the coming days if not weeks.
Last week, Reuters also reported that shipments of refined products from French refineries and depots were blocked following the strike action, however, some refineries operated with a reduced flow. Bloomberg reports that because of the strike action, over 80% of France’s 1.1 million barrels-a-day processing capacity is halted or in the process of shutting down. Also, other plants in Europe are buying less crude.
Meanwhile, some typical destinations for Nigerian crude like Spain’s San Roque refinery and Italy’s Sarroch plant have halted capacity for work. The strike action is part of a nationwide movement against pension system changes that lift the retirement age from two years to 64. The changes were forced through parliament without a vote.
Brent crude price projections
JP Morgan Global Head of Energy Strategy, Christyan Malek recently told Bloomberg that Brent crude could go as low as $60 per barrel in the near term. He said:
- “I think Brent Crude could go much lower to break $60 in the near term, particularly as we go into a quarter of surpluses with plenty of excess inventories built up through last year from Russia at just the same time as demand Europe and the USA is entering into a recession which could then create an additional surplus.
- “If you compound that, that hasn’t been priced in, that’s the next shoe to drop. And the shoe to drop after that is OPEC’s reaction function.”
Brent crude is Nigeria’s benchmark for crude oil sales and if indeed the projections by JP Morgan occur in the coming quarter, Nigeria could see reduced oil revenues.
This will happen at a time when the country is struggling with both increased crude oil production amid local challenges like security and political risks as well as international challenges like the Russian-Ukraine war effect on global supply chains and the current French strike action which is already impacting crude sales.
It is important to note that Nigeria failed to increase its oil revenues when oil prices were high in 2022 mainly because of crude oil theft, which has not been totally eradicated, however, the government is working to ensure oil production is no longer affected by this challenge.
What you should know: Brent crude price was at $74.84 per barrel as of Monday, March 27 at 4:51 AM (GMT+1). Meanwhile, Bonny Light benchmark was $73.87 per barrel as of Monday, March 27 at 4:51 AM (GMT+1).
