March 31, 2022

WWW.ENERGYINTEL.COM

West African Barrels Stranded in Backwardated Market

  • West African oil is losing out in Europe to local grades due to a steeply backwardated price curve.
  • Softer differentials are expected and could help clear the overhang of Nigerian cargoes.
  • Chinese lockdowns are cramping the outlook for Angolan spot trade, while large purchases of Russia's Urals are squeezing Nigerian barrels.

West Africa is struggling to capitalize on rocketing crude oil prices in the wake of the Russian invasion of Ukraine. A hefty overhang is clouding the start of May trading for Nigeria and fresh Covid-19 lockdowns are threatening Chinese demand for Angolan fare.

As of Mar. 30, Nigeria still had 25 April-loading cargoes to shift. Angola had thinned its April overhang to a handful of cargoes, while the trade in May loadings is starting late.

Sellers admit some discounting will be necessary to clear the decks and enable May trading to take off. They are waiting for a bit more clarity, a flatter price structure and improving arbitrage before proceeding.

Sellers and buyers got into a standoff after Russia invaded Ukraine in late February, when refiners shunned Russian barrels for fear of contravening sanctions. They sought alternative crudes instead.

“Nobody knew whether they could buy Urals or not … But people put their prices up anticipating shortages," said one West African seller. As prices rose buyers held off — especially after some cargoes had changed hands at top dollar.

Estimated West African Exports, February 2022
('000 b/dVol.
Angola1,103
Cameroon91
Chad92
Congo (Brazzaville)231
Congo (Kinshasa)32
Cote d'Ivoire52
Equatorial Guinea71
Ghana102
Gabon202
Nigeria*1,370

Volatility at Play

Brent futures prices have whiplashed since the Feb. 24 invasion, closing at $113 on Mar. 30 after nearly touching $130 earlier in the month — a trigger for significant demand destruction.

Against this backdrop, West Africa suffered a confluence of disadvantages that reduced its competitiveness as many refiners focused on locally available crudes. Record backwardation — the Brent futures six-month spread exceeded $15 per barrel in early March — disadvantaged longer-haul West African fare.

In Europe, Nigeria’s key market, refiners chose Mediterranean and North Sea crudes as alternate blends to Russia's toxic barrels. This sent the prices of North Sea grades to historic highs.

Algeria’s Sonatrach hiked the official selling price (OSP) of Saharan Blend — a close rival to Nigerian crudes — by $1.95 to dated Brent plus $5/bbl — substantially above Nigerian National Petroleum Corp.'s (NNPC) OSPs for the same month.

Covid Rises Anew

The closed arbitrage window to Asia, with the Brent Dubai Exchange of Futures for Swaps (EFS) averaging almost $12 in March, compounded West Africa's problems, as did higher freight costs over the month.

Adding to the injuries, China, Angola’s key market, ordered a spate of new lockdowns. This reduced demand already compressed by high benchmark prices. China always takes a sizable chunk of its Angolan fare on a term basis, but without Europe to prod Chinese spot buyers into action, Angolan sellers have struggled to move their spot cargoes in May.

Sellers are counting on backwardation to continue easing as the market direction becomes clearer. The six-month Brent curve has narrowed a bit to $13 this week, while the Brent Dubai EFS came in to $9.26/bbl as of Mar. 31 morning.

Traders are also gauging flows of Russian crude to West Africa’s traditional Asian markets like India and China and the extent to which this will displace West Africa into Europe at lower prices.

Estimated West African Exports to Asia, February 2022
('000 b/d)NigeriaAngolaOtherTotal
China0618233851
India2756860403
Taiwan06934103
Indonesia103032135
Japan0000
Other*034136170
Total3787894951,662

Discounted Urals

Nigeria’s most important Asian customer, Indian Oil Corp. (IOC), has so far reportedly bought 6 million barrels of Urals, which is selling at discounts of up to $30/bbl, for loading in April and May. Other Indian buyers are said to have pushed the total to at least 13 million bbl. “It is all still playing out," says one seller.

Gauging the price at which the overhang will move is tricky.

NNPC raised official selling prices for April cargoes on Mar. 23, hitching Escravos, the most expensive flagship grade, by 36¢ to dated Brent plus $2.89/bbl. It hiked Qua Iboe and Forcados by 21¢/bbl and 30¢/bbl to dated plus $2.37 and $2.72, respectively. However, this appeared out of line with market sentiment as the overhang remained.

Price reporting firms marked Forcados and Qua up by more than $1.10/bbl over the month, to dated Brent plus $3.15/bbl and $3.10/bbl, respectively.

Angolan flagship Cabinda gained around 40¢/bbl to dated plus $2.30 during the first half of March, but then lost 20¢/bbl, according to price reporting firms.

Estimated Nigerian Loadings, February 2022
DateVol. ('000 bbl)SellerBuyerDest.
Abo 38.8° API, 0.14%S, TAN=0.98
no cargoes
Agbami 48.28° API, 0.04%S, TAN=0.05
2-3975ChevronIOCIndia
11-12975NNPC-MocohChevron
Vitol
PertaminaIndonesia
19-20975ChevronShell
27-28975ChevronBP
IOCIndia
Akpo
2-31,000CNOOCShellDurban
17-181,000TotalExxon
IOCIndia
Amenam 39.4° API, 0.1%S, TAN=0.30
>2-3950NNPC-VitolRepsolSpain
15-16950Total‡
< NNP-SaharaShellLe Havre
Antan 28° API, 0.3%S, TAN=0.34
no cargoes
Anyala Madu
2650NNPC-Vitol† LighteringUSEC
23650NNPC-VitolPetroineosFinnart
Bonga 29.39° API, 0.25%S, TAN=0.46
11-12950ExxonIOC + AgbamiIndia
19-20950NNPC-LeveneMRPLIndia
< ShellIOCIndia
Bonny Light 35.09° API, 0.15%S, TAN=0.25
15-16950ShellTuprasIsmir
Brass River 40.1° API, 0.18%S, TAN=0.13
11-12400Oando-Vitol†SavonaItaly
EA 35° API, 0.09%S, TAN=0.13
no cargoes
Egina 27.3° API, 0.165%S, TAN=0.24
7-8950SapetroTotal
GalpPortugal
13-14950NNPC-EyrieTotal
IrvingCanada
950Totalno info
< CNOOCTotalCanada
Erha 35.4° API, 0.18%S, TAN=0.13
6-7950NNPC-MercuriaVitol
CepsaSpain
21-22950ShellVitol
PertaminaIndonesia
Escravos 32.4⁰ API, 0.17%S, TAN=0.56
2-3950no infoPertaminaIndonesia
6-7950NNPC-BPSasolS. Africa
17-18950ChevronPreemSweden
24-25950NNPC-SaharaBP
CepsaSpain
Forcados 31.5⁰ API, 0.22%S, TAN=0.33
31-01950NNPC-MatrixEquinor
4-5950Seplat Mercuria
ShellGermany
8-9950NNPC-TotalAliagaTurkey
12-13950NNPC-TotalFosFrance
16-17950NNPC-SaharaMercuria
EniItaly
20-22950Shell/indig1CepsaSpain
24-25950OandoCepsa
DurbanS. Africa
Jones Creek 30.01° API, 0.35%S
14-15950NNPC-GlencoreFosFrance
Okono 40.6⁰ API, 0.07%S, TAN=0.2
11-12950NPDC-EmoCepsaSpain
Okoro
no info
Okwuibome 35.39° API, 0.02
5-6650Sterling/Vitol†BPRotterdam
16-17600Sterling/Vitol†FosFrance
27-28300Sterling/Vitol†MonroeUSEC
Pennington
no cargoes
Qua Iboe 37.6° API, 0.11%S,TAN=0.33
2-3950ExxonTotal
HPCL†India
10-11950NNPC-MRSHPCL†India
13-14950NNPC-BonoP66
Litasco
Petroineos
Sahara
CepsaSpain
19-20950ExxonShell
TotalTrieste
25-26950NNPC-BB EnergyExxon
TotalRotterdam
Usan 29⁰ API, 0.27%S, TAN=1.53
12-13950ExxonIOCIndia
Yoho 40.5° API, 0.06%S, TAN=0.23
24-25950ExxonMercuriaUSEC

Estimated Angolan Loadings, February 2022
DateVol. ('000 bbl)SellerBuyerDest.
Cabinda 32.2° API, 0.15%S, TAN=0.11
11-12950Chevron PetrogalPortugal
20-21950EniPetroineos
CPCTaiwan
Clov 33.17° API, 0.25%S, TAN=0.54
8-91,000TotalRepsolSpain
19-201,000BPSinochemChina
Dalia 23.4⁰ API, 0.49%S, TAN=1.54
8-9950SonangolVitol
16-17950TotalCNOOCChina
27-28950SonangolUnipecChina
Gimboa 25.3° API, 0.56%S, TAN=0.65
no cargoes
Gindungo 32° API, 0.58% S, TAN=0.54
13-14950TotalUnipecChina
Girassol 30.21° API, 0.34%S, TAN=0.39
5-61,000TotalPTTThailand
16-171,000SonangolExxon
BPSapref
26-271,000ExxonShell
Hungo 29.4° API, 0.59%S, TAN=0.46
1-2950SonangolSinochem (t)China
Kissanje 30.3° API, 0.36%S, TAN=0.51
6-7950Equinor UnipecChina
27-28950EniVitol
ValeroUSEC
Mondo 27.5° API, 0.438%S, TAN=0.922
4-5950SonangolSinochem (t)China
Mostarda 28° API, 1.12%S, TAN=0.53
7-8950GalpSinochem China
15-16950SonangolSinochem (t)China
23-24950TotalUnipecChina
Nemba 37° API, 0.276%S, TAN=0.24
10-11950ChevronIOCIndia
22-23950EniEnapChile
Olombendo 35.2° API, 0.12%S, TAN=0.11
15-16950SSIUnipec (t)China
Palanca 37.2° API, 0.18%S TAN=0.03
24-25985EniCPCTaiwan
Pazflor 24.7° API, 0.4%S,TAN=1.63
5-6950EquinorSinochem
17-18950ExxonCNOOCChina
27-28950TotalExxonFos
Plutonio 33.2° API, 0.37%S, TAN=0.12
1-21,000SIPCUnipec (t)China
6-71,000SIPCUnipecChina
19-201,000SonangolSinochem (t)China
27-281,000BPP66USEC
Sangos 31⁰ API, 0.6%S, TAN=0.29
15-16950SSIUnipecChina
Saturno 27.6° API, 0.8%S, TAN=0.53
11-12950SonangolSinochemChina
< BP
Saxi-Batuque 34.6° API, 0.25%S, TAN=0.59
17-18950SonangolIOC (t)India

Other West African Loadings, February 2022
DateVol. ('000 bbl)SellerBuyerDest.
Cameroon
Kole 32.06° API, 0.33%S, TAN=0.5
4-5950SNH-Unipec China
23-26950AddaxUnipecChina
Lokele
10-11650SNHCepsaSpain
Chad
Doba 25.85° API, 0.09%S, TAN=2.23
8950CNPC/ClivedenPetroineos
CPCTaiwan
18950CNPC/ClivedenSenning
UniperNW. Europe
28950CNPC/ClivedenPetroineos
MaerskNW. Europe
Congo (Brazzaville)
Djeno 27.6° API, 0.341%S, TAN=0.69
1-2920PerencoUnipecChina
5-6920SNPC-TrafiguraUnipecChina
10-11920TotalPetroineos
teapotChina
15-16920PerencoUnipecChina
20-21920ChevronIOCIndia
27-28920TotalIOCIndia
Nkossa 39.92° API, 0.06%S, TAN=0.05
17-18950EniExxonAsia
Yombo
no info
Congo (Kinshasa)
Coco
5-7700PerencoBPEurope/Med
Cote d'Ivoire
Baobab
14-151,000CNRVitol
MRPLIndia
Espoir
1-5450CNRVitol
BP†Rotterdam
Equatorial Guinea
Aseng
no cargoes
New Zafiro 30.2° API, 0.25%S, TAN=0.74
18-191,000ExxonRepsolSpain
Ceiba
27-281,000KTEGIBP/CastellonSpain
Ghana
Jubilee 36.75° API, 0.29%S, TAN=0.05
9-10950KosmosChevronUSWC
20-21950TullowP66USEC
Sankofa 28° API, 030%S, TAN=0.08
1-2950VitolExxonItaly
Ten 33.0° API, 0.43% S, TAN=0.05
no cargoes
Gabon
Rabi Light 33.2° API, 0.14%S, TAN=0.08
9-10950GOC-VitolPV OilVietnam
20-21950TullowExxon
SK OilS. Korea
Rabi Blend 34.10° API, 0.06%S
1-2950AssalaShell
UnipecChina
25-26950AssalaShellMalaysia
Mandji
14-15950Perencono info
Etame 35.21⁰ API, 0.06%S, TAN=0.2
8-9600VaalcoExxon
PertaminaIndonesia
Lucina
1-2300PerencoPertaminaIndonesia
Oguendjo 34⁰ API, 0.67%S, TAN=0.6
no info
Dussafu
no info

Christina Katsouris, London