There are indications suggesting a fresh demand for Nigeria’s crude oil following dips in freight rates and a rising Mediterranean light sweet crude market.
More of the country’s crude barrels could head to the Mediterranean, due to dips in freight rates and a rising Mediterranean light sweet crude market, traders said.
After being shut out recently because of high freight and weaker prices for light, sweet Mediterranean grades, West African crude — particularly Nigerian grades — were looking attractive, market sources said.
According to Platts, Qua Iboe, Nigeria’s flagship grade, was assessed at Dated Brent plus $0.35/barrel Friday, having been trending downwards in recent months from Dated Brent plus $1.80/b in March.
“Freight is easing, so [European] refiners are looking at alternatives,” one crude trader said.
With imports from the United States down to a fraction, Nigeria has had to look eastward towards Asia, primarily China, India and Malaysia, for sale of its crude. But, recently, demand from those countries has slowed leading to millions of barrels languishing on the high seas.
Freight rates for West Africa to UK Continent were seen around levels of Worldscale 92.5 for fixtures for the week ending last Friday, down w10 week on week.
That comes as grades such as Azeri Light, which competes with Nigerian crudes, has risen steeply in the past week, having been at a multi-year low late May. Azeri Light CIF was assessed at Dated Brent plus $1.75/b Friday.
Other light grades in the region have also seen increases, due to a tighter Mediterranean sour crude market.
“The arbitrage is definitely opening and we should see WAF barrels move into the Med,” said one crude trader.
Crude could come from West African barrels in floating storage, traders said.
“I think that there are already some barrels coming out of storage…[as the] market structure is not so favorable to keep the barrels floating,” a trader said.
Some barrels could also be released from inland storage, traders said.