Oil traders are struggling to find buyers for 55 Nigerian crude oil cargoes as the spread of the coronavirus has dampened demand from China and European refiners. Most of Nigeria’s April crude oil export programme have not been sold, while about half Angola’s planned shipments for April have yet to find buyers, according to two traders who specialise in West African grades.
According to Bloomberg, about 70 per cent of April-loading cargoes from Angola and Nigeria have yet to find buyers, a marked decline from the normal pace of sales. It said the unsold lots would be competing against millions of barrels that were slated for export this month but had yet to be purchased. The report said, “The distances involved in transporting West African crude to Asia mean barrels exported in April likely wouldn’t reach China until May or even early June.
“That means traders need to evaluate what Chinese demand will look like several months in the future. There are tentative signs that China’s economy is picking up, but activities remain muted. “Demand for crude to be shipped to China has fallen dramatically in recent weeks due to the coronavirus. “West African flows this month are expected to slump by a third, according traders of the region’s barrels. On top of that, weak European oil refining margins are depressing purchases.”
According to Bloomberg, Nigeria and Angola are due to ship almost 100 cargoes in April, meaning the rate of unsold consignments is about 70 per cent. The traders were quoted as saying that by this time in a normal trading cycle, 50 per cent of the oil should have been sold. “The slow sales for April are overlapping with unsold oil for this month. Traders estimate that about 17 per cent of March volumes for Nigeria and Angola haven’t yet been purchased, along with some shipments from smaller producers, including the Republic of Congo, Gabon and Chad,” the report said.
The international oil benchmark, Brent crude, has been on a downward trend since the coronavirus broke out, posing a threat to Nigeria’s budget for this year. The 2020 budget, which was signed by the President, Major General Muhammadu Buhari (retd.), in December, was based on oil production of 2.18 million barrels per day with an oil price benchmark of $57 per barrel. The Federal Government is looking to generate N2.64tn oil revenue, which is 32.34 per cent of expected total revenue for the year, with non-oil revenue projection put at N1.80tn.
Brent crude, against which Nigeria’s oil is priced, stood at $50.88 per barrel as of 6:15pm Nigerian time on Thursday. “We think the Federal Government has very limited alternatives to cover any shortfall from oil revenue,” analysts at CSL Stockbrokers Limited said in a note on Thursday. The Minister of Finance/Budget Planning, Mrs Zainab Ahmed, said on Wednesday that the government was concerned about the drop in oil revenue and would soon start a mid-term review of the budget to determine the way forward.