August 29, 2022

WWW.ENERGYINTEL.COM

West Africa Falls To Earth In Slow October Trade

  • Angolan sellers, who have priced in a premium for their crude, are reporting a sluggish start to October trade.
  • Nigeria, having enjoyed a banner two months earlier this summer, is suddenly stuck with an overhang of September cargoes.
  • West African sellers are pinning their hopes on robust diesel demand to support their distillate-rich grades.

After a busy summer, sellers of West African crude have returned to earth and encountered a bump in the road as they market October loading cargoes. Trade has slowed, Nigeria’s overhang has reappeared, and differentials have softened thanks to rising supply and a slowdown in demand.

Some sellers hope that shorter Angolan and Nigerian programs will support buying and strong diesel crack spreads will support distillate-rich grades from West Africa. However, these sellers may be forced to rethink their competitiveness now that buyers are getting choosier and the terms of trade shift.

Fall Programs

As of Aug. 25, Nigeria had a September overhang “in the high single digits,” according to one trader. This comes after cargoes flew off the shelf the past two months.

Angola had cleared all but two cargoes of the September program but has so far sold only one spot for October loading since the program was unveiled 10 days ago, according to a major buyer. Angola’s September program comprised 33 cargoes, or just over 1 million b/d, the lowest since summer 2021.

Nigeria’s total cargoes have yet to be counted, but the expected return of Forcados, which has suffered from technical problems at the terminal, should boost output compared to recent months. The Bonny light system, however, remains crippled by theft.

The global oil market has relaxed over the past month but still remains tight. Benchmark prices are as volatile as ever. After Saudi Arabia’s pledge to keep all options on the table spurred a rally last week, one that buoyed sentiment at the start of the current week, and front-month Brent recovered to some $105 on Aug. 29.

Refiners, meanwhile, continue to enjoy massive margins on diesel. In the US, the October heating oil crack — what a refiner can expect to earn on refining a barrel of crude into diesel — spiked at $71/bbl on Aug. 25, though this retreated on Aug. 29 as diesel prices took an approximate 3% hit on Nymex.

Estimated West African Exports, July 2022
('000 b/d)Vol.
Angola1,118
Cameroon82
Chad123
Congo (Brazzaville)209
Congo (Kinshasa)NA
Cote d'Ivoire31
Equatorial Guinea118
Ghana123
Gabon186
Nigeria*1,117

Arbitrage Opportunities

Improving arbitrage has bolstered Brent-linked West African crude’s attractiveness in Asia relative to Mideast crudes. The Brent Dubai Exchange of Futures for Swaps (EFS), which broadly tracks Brent’s strength relative to Dubai, narrowed to $4.89/bbl last week, having spiked at $14.38/bbl in early March. It averaged $6.02/bbl in the first half of this year. That said, rising freight costs are dampening some of the enthusiasm, with a VLCC from West Africa to China costing around $3.75/bbl to ship.

The West Africa market usually looks to Asian tenders to gauge appetite and pricing, and it is still waiting further details of three Indian tenders. IOC awarded 2 million barrels of West African crude each to Shell and Total, and India’s MRPL took 1 million barrels from Total.

While some expect demand in China — Angola’s main customer — to bounce back from a 7.5% dip in July, economic growth remains slow and drought-induced power shortages are paralyzing industrial activity. The recent government crackdown on independent refiners could well reduce runs substantially as many teapots regularly buy West African fare. If demand does return, West Africa will have to compete with heavily discounted imports from Russia, which is thought to have shipped 1.3 million b/d by vessel in August.

Estimated West African Exports to Asia, July 2022
('000 b/d)NigeriaAngolaOtherTotal
China0524242766
India926390245
Taiwan3164095
Indonesia920092
Japan0000
Other*621240186
Total2777753321,384

Sonangol is taking a bullish line on Angolan fare, offering October loading Girassol, which has a high middle distillate yield, at dated Brent plus $8/bbl. This is well above assessments of price reporting firms, which marked Girassol down to dated plus $5.1/bbl last week, compared to $7.7/bbl a month earlier. They also marked Cabinda down to dated Brent plus $3.75/bbl from dated plus $6/bbl over the same period.

Trade in Nigerian fare paused for much of the week as European refiners mulled alternative offerings such as cheap Libyan output, reportedly back at 1.2 million b/d prior to troubles reported over the weekend. They also waited for official selling prices for September, which appeared midweek.

While Nigeria’s program will be shorter, Forcados loadings, which were hit by theft and technical problems, should return to normalcy in mid-September. On the other hand, Bonny Light remains crippled by theft and sabotage.

Nigeria’s term customers had been expecting Nigerian National Petroleum Corp. (NNPC) to cut the official selling prices so as to avoid losses on unsold September cargoes. However, NNPC appears behind the market curve. It lopped just 37¢/bbl off Escravos to dated Brent plus $9.06/bbl — even though price reporting firms marked it down to dated plus $4.20 last week. NNPC raised the price of Brass and Qua Iboe, generally making it difficult to shift the overhang. Sellers are offering Qua Iboe at dated Brent plus $6.50/bbl though most expect it will trade $2/bbl lower.

Estimated Nigerian Loadings, July 2022
DateVol. ('000 bbl)SellerBuyerDest.
Abo 38.8° API, 0.14%S, TAN=0.98
14-15600Eni
Agbami 48.28° API, 0.04%S, TAN=0.05
7-8975NNPC-CoolspringP66USEC
18-19975ChevronSK OilS. Korea
28-29975Prime Shell
Akpo
6-71,000SapetroExxon
CepsaSpain
19-201,000TotalGalpPortugal
Amenam 39.4° API, 0.1%S, TAN=0.30
*3-4950TotalSasolS. Africa
14-15950NNPC-Duke-TotalHPCLIndia
27-28950NNPC-SaharaTotal
PetroineosEurope
Antan 28° API, 0.3%S, TAN=0.34
No Cargoes
Anyala Madu
10-11650NNPC-MocohShell
Monroe EnergyUSEC
26-27650NNPC-VitolPetroineosLavera
Bonga 29.39° API, 0.25%S, TAN=0.46
*8-9950ExxonTotalEurope
*16-17950ShellEquinorEurope
*30-31950TotalIrvingCanada
Bonny Light 35.09° API, 0.15%S, TAN=0.25
NA
Brass River 40.1° API, 0.18%S, TAN=0.13
*11-12 Eni
21-22 NNPC-BP
31-01 Oando-Vitol
EA 35° API, 0.09%S, TAN=0.13
29-30859NNPC-VitolEquinor
PetroineosEurope
Egina 27.3° API, 0.165%S, TAN=0.24
1-2950NNPC-SaharaGalpPortugal
8-9950SapetroVitol
SIRC'Ivoire
15-16950CNOOCFormosaTaiwan
22-23950PrimeShell
GalpPortugal
29-30950CNOOCUnipec
Glencore
HPCLIndia
Erha 35.4° API, 0.18%S, TAN=0.13
*14-15950ExxonIrvingCanada
*26-27950NNPC-SaharaGlencore
HPCLIndia
Escravos 32.4⁰ API, 0.17%S, TAN=0.56
7-8950NNPC-BonoP66
Shell
PertaminaIndonesia
15-16950ChevronRepsolSpain
22-23950NNPC-VitolShell
PertaminaIndonesia
30-31950ChevronRepsolSpain
Forcados 31.5⁰ API, 0.22%S, TAN=0.33
2-31,050Shell/indig1SIRC'Ivoire
11-12950Shoreline
Okono 40.6⁰ API, 0.07%S, TAN=0.2
21-22950NNPC-VitolPetroineos
LaveraFrance
Okwuibome 35.39° API, 0.02%S
28-31950VitolDelta USEC
Qua Iboe 37.6° API, 0.11%S,TAN=0.33
*6-7950NNPC-LeveneBP
Petroineos
Glencore
ExxonEurope
950NNPC-MRSChevron
*12-13950Exxon† Singapore
18-19950NNPC-GlencoreCepsaSpain
23-24950Exxon PertaminaIndonesia
Usan 29⁰ API, 0.27%S, TAN=1.53
19-20950ChevronCepsaSpain
Yoho 40.5° API, 0.06%S, TAN=0.23
28-291,000 Le Havre
Estimated Angolan Loadings, July 2022
DateVol. ('000 bbl)SellerBuyerDest.
Cabinda 32.2° API, 0.15%S, TAN=0.11
12-13950TotalPetroineosEurope
24-25950ChevronTotal
Petroineos
Clov 33.17° API, 0.25%S, TAN=0.54
2-31,000BPRepsolSpain
11-121,000ExxonP66USEC
20-211,000Total‡ Europe
29-301,000Equinor
Dalia 23.4⁰ API, 0.49%S, TAN=1.54
2-3950SonangolSinochem (t)China
10-11950TotalPetrochinaChina
18-19950SonangolUnipec (t)
BP (s)Castellon
26-27950SonangolSinochem (t)China
Gimboa 25.3° API, 0.56%S, TAN=0.65
No Cargoes
Gindungo 32° API, 0.58% S, TAN=0.54
27-28950TotalSinochem China
Girassol 30.21° API, 0.34%S, TAN=0.39
9-101,000SonangolPTTThailand
21-221,000TotalChevron
P66USEC
30-311,000SonangolFormosaTaiwan
Hungo 29.4° API, 0.59%S, TAN=0.46
2-3950SonangolUnipecChina
Kissanje 30.3° API, 0.36%S, TAN=0.51
8-9950Exxon† Singapore
26-27950EniPTTThailand
Mondo 27.5° API, 0.438%S, TAN=0.922
28-29950SonangolSinochem (t)China
Mostarda 28° API, 1.12%S, TAN=0.53
8-9950SonangolSinochem (t)China
16-17950Exxon‡
24-25950TotalSinochem China
Nemba 37° API, 0.276%S, TAN=0.24
5-6950SonangolSinochem (t)China
17-18950ChevronUnipecChina
29-30950SonangolIOC (t)India
Olombendo 35.2° API, 0.12%S, TAN=0.11
4-5950SSIUnipecChina
21-22950EniBB EnergySingapore
Palanca 37.2° API, 0.18%S TAN=0.03
26-27985SomoilLitasco
CPCTaiwan
Pazflor 24.7° API, 0.4%S,TAN=1.63
8-9950EquinorShell
ExxonFos
19-20950SonangolUnipec (t)China
Plutonio 33.2° API, 0.37%S, TAN=0.12
5-61,000BPP66USEC
17-181,000SonangolIOCIndia
Sangos 31⁰ API, 0.6%S, TAN=0.29
5-6950SonangolSinochem (t)China
23-24950SSIUnipec China
Saturno 27.6° API, 0.8%S, TAN=0.53
5-6950BPUnipecChina
20-21950BPUnipec (s)China
Saxi-Batuque 34.6° API, 0.25%S, TAN=0.59
23-24950SonangolSinochem (t)China
Estimated Other West African Loadings, July 2022
DateVol. ('000 bbl)SellerBuyerDest.
Cameroon
Kole 32.06° API, 0.33%S, TAN=0.5
3-8950SNH-PetrocamShellEurope
25-29950SNH-PetrocamShellEurope
Lokele
17-21650SNH-Petraco Europe
Chad
Doba 25.85° API, 0.09%S, TAN=2.23
2950CNPCSenning
ShellWilhelmshafen
10950CNPC-PetrochinaTotalEurope
8950Exxon* Fos
25950CNPCSenning
PetroineosChina
Congo (Brazzaville)
Djeno 27.6° API, 0.341%S, TAN=0.69
5-6920TotalIOCIndia
10-11920Congo (Br.)BB Energy
UnipecChina
15-16920SNPCMercuria
MubadalaChina
19-20920TotalIOCIndia
24-25920Congo (Br.)BGN
UnipecChina
28-29920PerencoUnipecChina
Nkossa 39.92° API, 0.06%S, TAN=0.05
17-18950EniPetrogalPortugal
Congo (Kinshasa)
Coco
No Cargoes
Cote d'Ivoire
Baobab
16-17950CNRVitol-VaroEurope
Espoir
No Info
Yombo
No Info
Equatorial Guinea
Aseng
21-22650NobleGlencore
SarasEurope
New Zafiro 30.2° API, 0.25%S, TAN=0.74
2-31,000GEPetrolPetraco
Vitol
CepsaSpain
23-241,000ExxonIOCIndia
Ceiba
23-241,000PanoroTrafigura
UnipecChina
Gabon
Rabi Light 33.2° API, 0.14%S, TAN=0.08
5-6950GOC-VitolPV OilEurope
12-13450PerencoShell
24-25950TullowUnipecChina
Rabi Blend 34.10° API, 0.06%S
15-25650AssalaShell
ORLIsrael
Mandji
7-8900TotalStar
14-15450GOC-VitolSaras Europe
24-25450PerencoGlencore
PBFUSEC
31-03470Perenco Glencore
PBFUSEC
Etame 35.21⁰ API, 0.06%S, TAN=0.2
23-25500ExxonSarasEurope
Lucina
No Info
Oguendjo 34⁰ API, 0.67%S, TAN=0.6
No Info
Dussafu
No Info
Ghana
Jubilee 36.75° API, 0.29%S, TAN=0.05
11-12950TullowUnipecChina
22-23950KosmosGlencore
P66USEC
Sankofa 28° API, 030%S, TAN=0.08
13-14950Eni* Europe
Ten 33.0° API, 0.43% S, TAN=0.05
14-15950GNPC-LitascoValeroCanada

Christina Katsouris, London