Short Nigerian program affects Brent crude supplies
BY JENNY GROSS AND SARAH KENT
LONDON -- Nigeria is expected to export one of its lowest volumes of crude oil exports for four years in June, putting a strain on crude supplies in Europe and possibly steepening the premium buyers must pay for promptly-delivered crude compared with later in the year.
Export programs released this month showed Nigeria plans to export 1.76 MMbopd of crude oil in June, a volume not seen since April 2009 according to preliminary loading programs from the country and data on the website of the Joint Organizations Data Initiative, a collaboration between oil producers and consumers aimed at increasing energy market transparency.
Commodities like Brent oil are traded using futures contracts that have an expiration date, unlike stocks or bonds. Traders buy Brent at a predetermined price for delivery in the future.
Amrita Sen, oil analyst at consultancy Energy Aspects, said supply in Europe will be tight in the coming months; with production from West Africa, the North Sea and the Mediterranean expected to be lower than usual due to maintenance or production issues.
"We are likely to see stronger time spreads, or steeper backwardation, but I don't think you'll see price movement because there's so much concern about overall demand and macroeconomic issues at the moment," Ms. Sen said.
Brent crude prices have tumbled 17% to $98.97 a barrel since mid-February over concerns about the health of the global economy. June Brent Wednesday was 46 cents more expensive than July Brent, compared with 33 cents in the previous session.
Nigeria's oil production has flagged this year due to high incidences of theft in the country's oil-producing Niger Delta region impacting output. The state oil company, the Nigerian National Petroleum Corp. or NNPC, said last month that production in the first quarter of the year fluctuated between 2.1 and 2.3 MMbopd, compared with expectations 2.48 MMbopd.
Last month, Shell’s Nigerian subsidiary declared force majeure on its exports of Bonny Light crude oil after a high number of thefts forced it to close its Nembe Creek pipeline for repairs, shutting in some 150,000 bopd of production.
A force majeure is declared when a company is unable to fulfill its contractual obligations to deliver crude due to circumstances beyond its control.
A trader of West African crude said the short June programs had helped to prop up differentials of light, sweet Nigerian crude. Qua Iboe is trading around $3.75 above the dated Brent benchmark, a strong level for the grade, a trader said Wednesday.
Dow Jones Newswires