Nigeria’s dwindling revenue is set to worsen, as international crude oil traders have shunned the country’s export of Bonga crude oil grade for the months of May and June 2015, making it difficult for the country to find buyers for the product and putting the price of the commodity under pressure. According to a report by Platts, the differentials for Nigerian crude grade, Bonga, are sliding due to the accumulated oversupply from the May and June program ahead of the release of the new July program this week.
“On the demand side, Cepsa, Total, ExxonMobil are not buying Bonga at this stage and India’s strategic petroleum reserve alone cannot support the grade,” a trade from Europe stated. Market participants blamed the development on the oversupply of the Bonga crude grade, stating that the action is putting pressure on the already distressed prompt end of the curve primarily traded on a CFR/CIF (Cost & Freight/ Cost Insurance & Freight) basis.
One of the traders told Platts that May overhang affected grades like Bonga and Forcados, adding that the whole June Bonga program is open and unsold. However, other market players said that Bonga might find some support because of the Forcados force majeure and the fall in freight rates. Another trader told Platts that, “Forcados is losing its shine on the back of the force majeure. Sometimes you see switching between Bonga and Forcados, but the latter has been so lethargic and with so much length that the current delay has barely dented any sentiment.”
One other trader also stated that if the oversupply of Bonga continues, further along the curve, then the grade could move closer to flat to Dated Brent once the new Nigerian program is released. Industry participants told Platts that a late May Bonga CFR cargo was sold at Dated Brent plus $2.00 per barrel, while the freight rate for the WAF-UKC Suezmax route was around Worldscale 75, while Vitol offered a 950,000-barrel cargo of Bonga at Dated Brent plus $4.30 per barrel for arrival into Rotterdam on May 25-31.
Platts said offers heard for May Free On Board (FOB) basis parcels were at Dated Brent plus $1.00 per barrel and for June loaders at Dated Brent plus $1.50 per barrel. Additionally, a trader said, “Best interest I am hearing for second-half June Bonga cargoes from relaxed refiners were in the Dated plus $0.30-$0.40 per barrel range.” Nigeria’s revenue profile nosedived, when Shell, a couple of days declared force majeure on exports of Nigeria’s Forcados crude oil stream following a series of leaks in the Trans Forcados pipeline that brings the oil to the export terminal.
Reuters had also noted that several cargoes of Forcados for May loading were still on offer, with around 189,000 barrels per day (bpd) scheduled for export in six cargoes, noting that the June export programme, with a total of 158,000 bpd, had not yet started trading. According to Reuters, an overhang of light sweet crudes in the Atlantic Basin has depressed differentials to dated Brent and limited the impact of recent supply disruptions on some West African crude oil grades