Crude Oil Trade: Nigeria in line with OPEC+ production cuts as global interest for its grades increases
Nigeria seems fully committed to the implementation of its quota as agreed with OPEC+. According to the country's minister for state of petroleum, Nigeria's compliance has improved since August. Production of crude stood close to 1.8 million b/d in October, much lower than the 1.96 million b/d produced in June, when production from the new Egina field ramped up. Lagos has been arguing that Egina barrels should be excluded since condensate is not subject to OPEC limits.
The country's grades remain popular, with the export programme for December already down to its last cargoes, as the global market remains quite thirsty for both lighter and heavier Nigerian barrels. Improved demand has been supported by robust gasoline cracks and price increases in competing grades. Demand for West Africa's few heavy sour grades is quite strong as shipping hubs get prepared for 2020. Prices for Bonga and Egina reached record highs as refiners target grades producing more low-sulphur fuels.
Meanwhile, China has been importing more crude oil from West Africa, but primarily Angola, with flows having reached 1.48 million b/d according to IHS Markit Commodities at Sea. In total, Asia has been importing around 2.4 million b/d of West African crude oil so far in 2019. India and the rest of Asia have been absorbing more during the last couple of months, while flows to North West Europe remain strong.
In parallel to the production cuts and the decreasing flows from Saudi Arabia to the rest of Asia (excluding China), the continent had to rely more on alternative suppliers, with West Africa having partially filled the gap after Venezuela's collapse. Asia's appetite for West African grades has also been supported by oil prices, with Middle Eastern oil having become relatively more expensive compared to other grades.
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- Monthly Global Trade Monitor – October 2021