Glut in the international oil market especially due to low patronage in western countries is currently posing serious threats to Nigeria's oil export, Daily Trust can reveal.
Oil traders report that Nigeria's crude grades are no longer getting enough patronage from buyers due to oversupply in the international markets coupled with lower demand from the United States.
U.S. east coast refineries, major buyers of Nigeria's crude, shut down mid last year and cancelled orders from Nigeria.
Also discovery of oil and gas in shale-rock formations in the U.S. caused output to rise to 6.24 million barrels a day as a result of which Nigerian oil imports fell to 352,000 barrels a day in February, about a third of the amount purchased a year earlier, according to Bloomberg.
But the Nigerian National Petroleum Corporation (NNPC) had dismissed concerns at the time that the loss of the U.S. market posed any serious threat, pointing out that Nigeria may not even meet surging demands for its oil in China and other Asian countries.
However, traders of Nigerian Bonny Light and Qua Ibo grades now say they have been experiencing lower demand for Nigerian crude oil. Daily Trust learnt that on many occasions, tankers loaded with crude oil from Nigeria roam the high sea before getting buyers, a situation that occurs frequently since third quarter of 2012.
Even though Reuters reported that the situation witnessed a slight change last month, following a rise in consumption of refined petroleum products at the global market, already Nigerian officials have started airing concerns and stressing that steps must be taken to find reliable buyers as quickly as possible.
Recent reports show that the United States now gets so much fuel from its own shale deposits that Canadian exporters to U.S. are selling as far afield as Europe, underscoring how deeply the U.S. energy revolution is transforming global oil flows, according to international oil market reports by Reuters.
To offset the trend, Nigeria is sending cargoes to Asia but buyers that typically use cheaper, heavier crudes, demanded price cuts to cover the cost of shipping it halfway around the world.
The voyage from the Bonny Terminal in Nigeria to Tianjin, China, is 12,172 miles, compared with 5,847 miles to New York Harbour.
Efforts to get reaction from the Group Public Affairs Division of the NNPC on the implications of such trend proved abortive yesterday as officials in the department are not willing to speak on the issue.
But an official at NNPC who declined to be named said the trend is not surprising, as it is only in Nigeria that issues like these are not considered important until they get out of control.
He said many oil producing countries have already begun to adjust and look inwards in order to avert possible economic crisis but Nigeria seems unconcerned.
Nigerian governments at all levels rely heavily on oil revenues to fund projects and cost of governance.
At least 80 per cent of the 2013 Federal and state budgets are expected to be funded from oil revenues.
It is not clear at this time if the new global oil sales trend will affect the 2013 budget funding.
via Daily Trust