November 2, 2022

WWW.ENERGYINTEL.COM

West Africa Struggles to Sell Barrels Amid Global Shift

  • West Africa is facing fierce competition from the US and Brazil in Europe and Asia as crude flows undergo a global shift.
  • Angola has started discounting more aggressively in response to sluggish interest in traditional markets.
  • A return of Forcados, a key export grade, is compounding the problem of Nigeria's crude overhang.

The trade in December loading West African oil has gotten off to a choppy start, with Angolan sales slowing after a decent start and Nigeria still weighed down by a stubborn overhang.

Angolan sellers are hoping a recovery in Chinese demand will boost trade, while Nigeria urgently needs to recover market share in Europe. However, with global benchmarks, market structure and freight costs all skewed against long and medium-haul crudes, differentials will need to soften for West African crude to compete in Asia, Europe and the US markets, traders say.

As of Nov. 1, Nigeria, which had started the trading month with an overhang of 15-20 cargoes, still had a number in the “low teens” to shift even after cutting November official selling prices (OSPs) to clear the decks for December fare, traders said. Angola has shifted all its November fare but has sold only a handful of spot cargoes for December two weeks into the trading month.

Supply Tightness Persists

The global supply outlook remains tight for the rest of the year. Opec is cutting output in the final quarter, taking over 1 million b/d off the market, and the EU embargo on Russian seaborne exports is due to kick in on Dec. 5 along with the EU price cap scheme.

Already European refiners have been scaling back purchases of Russian crude since the invasion of Ukraine, and the search for alternate volumes has helped some West African producers. Angola, which has tended to benefit from reduced supplies of Russian Urals in the past, has sold more into Europe in recent months. European demand is recovering as French plants reopen after weeks of strikes and general maintenance finishes. It is expected to remain strong in the fourth quarter as restrictions tighten on Russia ahead of the embargo.

Estimated West African Exports, September 2022
('000 b/d)Vol.
Angola1,152
Cameroon53
Chad127
Congo (Brazzaville)278
Congo (Kinshasa)25
Cote d'Ivoire4
Equatorial Guinea98
Ghana127
Gabon178
Nigeria*1,157

Angola Awaits Buyers

Still, Angola is not seeing the upside this month. “Demand is slower than expected,” says one Angolan seller. “We expected a bigger pull from Europe. Without buying pressure from Europe, refiners in China don’t feel the pressure either,” the source said.

Price reporting firms assessed Girassol and Cabinda at dated Brent plus $3.20/bbl and dated plus $2.90/bbl in late October, up from plus $2/bbl and $1.55 mid-month. However, Sonangol, which shifted one cargo as soon after monthly trade started, is now discounting, having reportedly lopped 40¢/bbl off a cargo of Girassol now offered at dated plus $3.20bbl.

While lockdowns remain an ever-present threat in China, an uptick in crude runs and demand is fueling hopes that orders for spot Angolan cargoes will recover. China’s crude runs jumped by 1.2 million b/d in September and rose further in October to a 12-month high of 14.5 million b/d. China, which has gorged on discounted Russian crude, is said to be getting edgy as the embargo approaches, and refiners remain confused as to how the price cap scheme will work.

However, Angolan and other West African crudes look expensive in Asia due to high Brent benchmark prices and a severely backwardated market structure. The time spread for the first six Brent contracts ranging from December 2022 to May 2023 rose to more than $7 on Nov. 2.

This is compounded by rising freight rates. A very large crude carrier from West Africa to Asia now costs £5/bbl, according to one trader. On top of this is a wide spread between West Africa benchmark Brent and Dubai, with the Brent Dubai Exchange of Futures for Swaps hitting $7.97/bbl last week.

Estimated West African Exports to Asia, September 2022
('000 b/d)NigeriaAngolaOtherTotal
China0507249756
India194223124541
Taiwan0000
Indonesia98063161
Japan0000
Other*3232064
Total3247624361,522

Other benchmark differentials also disadvantage West Africa. West Texas Intermediate (WTI) is very cheap thanks to US sales from strategic reserves, which drove the discount versus Brent to $8.40 last week. This enabled US and WTI-linked crudes to undercut West African crude in in Europe and Asia.

Angola is feeling the pressure both in Europe and Asia from competitors like Brazil where buyers are “very shrewd at assessing markets and prices,” says one trader.

While Nigerian crude would appear an obvious buy in a European market where sweet crude is coveted, “It is undercut by cheaper Azeri crude within the region and WTI outside the region,” says a Chinese trader.

While Nigeria shaved the monthly official selling prices to clear the decks of November cargoes, traders consider that offers will need to fall further to be competitive -- especially as supply is set to increase. The reopening of the Forcados terminal, which has been closed for more than three months, could add more than 210,000 b/d if producers return to levels seen in early 2022.

Nigerian National Petroleum Corp. sliced 13¢/bbl off Escravos to dated Brent plus $4.01/bbl, and 30¢/bbl off Qua Iboe to dated plus $2.90/bbl. It also cut the price of Forcados and Bonny though little would have traded of the latter two grades given both terminals were closed. Price reporting firms assessed Qua Iboe at dated Brent plus $1.75/bbl down from dated plus $3.2/bbl in mid October, Escravos was assessed at dated Brent plus $4/bbl, down from dated plus $5.35/bbl mid month.

Estimated Nigerian Loadings, September 2022
DateVol. ('000 bbl)SellerBuyerDest.
Abo 38.8° API, 0.14%S, TAN=0.98
1-2600EniPetrobrasBrazil
Agbami 48.28° API, 0.04%S, TAN=0.05
4-5975FamfaIOCIndia
13-14975ChevronIOCIndia
22-23975NNPC-VitolIOCIndia
Akpo
1-21,000CNOOCGlencore
AstronCape Town
15-161,000TotalIOCIndia
Amenam 39.4° API, 0.1%S, TAN=0.30
8-9950Total‡ Le Havre
19-20950Total SasolS. Africa
29-30950NNPC-Matrix-ATCP66USEC
Antan 28° API, 0.3%S, TAN=0.34
12-13950NNPC-TotalBPEurope
Anyala Madu
12-13650NNPC-SaharaSIRC'Ivoire
27-28650NNPC-Sahara
Bonga 29.39° API, 0.25%S, TAN=0.46
>15-16950ExxonCepsaSpain
950NNPC-BPTotalEurope
29-30950ShellUnipec
ShellRotterdam
Bonny Light 35.09° API, 0.15%S, TAN=0.25
No info
Brass River 40.1° API, 0.18%S, TAN=0.13
No cargoes
EA 35° API, 0.09%S, TAN=0.13
13-14950NNPC-VitolBPEurope
Egina 27.3° API, 0.165%S, TAN=0.24
10-111,000PrimeTotal
ORLIsrael
17-181,000NNPC-OandoVitol†Europe
25-261,000TotalPertaminaIndonesia
Erha 35.4° API, 0.18%S, TAN=0.13
6-7950NNPC-SaharaAncapUruguay
18-19950ShellSARSenegal
Escravos 32.4⁰ API, 0.17%S, TAN=0.56
1-2950No infoSARSenegal
9-101,000NNPC-EyrieShell†Rotterdam
16-171,000NNPC-TotalGotebergSweden
1,000ChevronPertaminaIndonesia
29-301,000NNPC-Total Italy
Forcados 31.5⁰ API, 0.22%S, TAN=0.33
force majeure
Jones Creek 30.01° API, 0.35%S
8-9950NNPC-LevenePetroineos
Okoro
13-14950ShellP66USEC
Okwuibome 35.39° API, 0.02
13-14950VitolMRPLIndia
Pennington
1-2950ChevronTuprasTurkey
Qua Iboe 37.6° API, 0.11%S,TAN=0.33
4-5950NNPC-BonoP66
Exxon
HPCLIndia
9-10950ExxonPertaminaIndonesia
16-17950ExxonDeltaUSEC
22-23950NNPC-OandoCepsaSpain
29-30950NNPC-Sahara
Usan 29º API, 0.27% S, TAN=1.53
9-10950NexenExxonMed/Europe
Yoho 40.5° API, 0.06%S, TAN=0.23
30-01950NNPC-MocohExxon
PetrobrasBrazil
Estimated Angolan Loadings, September 2022
DateVol. ('000 bbl)SellerBuyerDest.
Cabinda 32.2° API, 0.15%S, TAN=0.11
10-11950SonangolChevron
PetrogalPortugal
20-21950ChevronEnapChile
Clov 33.17° API, 0.25%S, TAN=0.54
1-21,000Total‡ Europe
10-111,000Exxon‡ Europe
19-201,000EquinorTotal
Mubadala
PetrobrasBrazil
28-291,000Total‡ Donges
Dalia 23.4⁰ API, 0.49%S, TAN=1.54
3-4950TotalUnipec
SarasItaly
12-13950SonangolUnipec (t)†China
19-20950SonangolUnipec (t)†China
Gimboa 25.3° API, 0.56%S, TAN=0.65
no info
Gindungo 32° API, 0.58% S, TAN=0.54
23-24950SonangolSinochem (t)China
Girassol 30.21° API, 0.34%S, TAN=0.39
31-011,000SonangolExxonSingapore
26-271,000Sonangol P66USEC
Hungo 29.4° API, 0.59%S, TAN=0.46
6-7950ExxonIOCIndia
25-26950EquinorUnipec†China
Kissanje 30.3° API, 0.36%S, TAN=0.51
2-3950EquinorIOCIndia
21-22950ExxonIOCIndia
Mondo 27.5° API, 0.438%S, TAN=0.922
10-11950SonangolSinochem (t)China
Mostarda 28° API, 1.12%S, TAN=0.53
2-3950SonangolSinochem (t)China
10-11950TotalUnipec†China
18-19950SSIUnipec†China
25-26950SonangolSinochem (t)China
Nemba 37° API, 0.276%S, TAN=0.24
2-3950ChevronIOCIndia
7-8950SonangolSinochem (t)China
23-24950TotalIOCIndia
28-29950SonangolIOCIndia
Olombendo 35.2° API, 0.12%S, TAN=0.11
13-14950EniCepsaSpain
Palanca 37.2° API, 0.18%S TAN=0.03
26-27950SomoilLitasco
Unipec†China
Pazflor 24.7° API, 0.4%S,TAN=1.63
1-2950TotalExxonRotterdam
10-11950BPExxonRotterdam
20-21950TotalSarasItaly
Plutonio 33.2° API, 0.37%S, TAN=0.12
11-121,000SonangolIOCIndia
Sangos 31⁰ API, 0.6%S, TAN=0.29
8-9950SonangolSinochem (t)China
27-28950SSIUnipec†China
Saturno 27.6° API, 0.8%S, TAN=0.53
13-14950EquinorUnipec†China
28-29950SonangolSinochem (t)China
Saxi-Batuque 34.6° API, 0.25%S, TAN=0.59
29-30950BPUnipec†China
Estimated Other West African Loadings, September 2022
DateVol. ('000 bbl)SellerBuyerDest.
Cameroon
Kole 32.06° API, 0.33%S, TAN=0.5
7-8950SNHShell
IOCIndia
Lokele
19-20650AddaxUnipec
SarasEurope
Chad
Doba 25.85° API, 0.09%S, TAN=2.23
3950SHT-PCCLShellWilhelmshaven
10950CNPC/ClivedenSenning
ExxonFrance
17950CNPC/ClivedenVitolFujaira
25950PetronasShellWilhelmshaven
Congo (Brazzaville)
Djeno 27.6° API, 0.341%S, TAN=0.69
>1-2920TotalChevron
UnipecChina
920ChevronTotal
IOCIndia
10-11920SNPC-GlencoreUnipecChina
15-16920TotalUnipecChina
18-19920PerencoUnipecChina
22-23920SNPC-BB EnergyIOCIndia
27-28920TotalMRPLIndia
Nkossa 39.92° API, 0.06%S, TAN=0.05
2-3950SNPC-TrafiguraP66USEC
24-25950EniGlencore
AstronCape Town
Congo (Kinshasa)
Coco
3-4750PerencoBP
PertaminaIndonesia
Cote d'Ivoire
Baobab
No info
Espoir
1-14120CNR-VitolBPRotterdam
Equatorial Guinea
Aseng
9-10950Noble-GlencoreBPRotterdam
New Zafiro 30.2° API, 0.25%S, TAN=0.74
6-71,000Exxon‡ Trieste
Ceiba
24-251,000GEPetrolUnipecChina
Gabon
Rabi Light 33.2° API, 0.14%S, TAN=0.08
2-3950PerencoUnipecChina
21-22950PerencoGlencore
Rabi Blend 34.10° API, 0.06%S
13-14750Assala-ShellORLIsrael
28-29950GOCVitol
PertaminaIndonesia
Mandji
1-2450Total
12-13450PerencoGlencore
Unipec
20-21450PerencoGlencore
Unipec
29-30450GOCVitol
Ghana
Jubilee 36.75° API, 0.29%S, TAN=0.05
2-3950TullowValeroCanada
13-14950KosmosTrafigura
P66USEC
24-25950GNPCUnipecChina
Sankofa 28° API, 030%S, TAN=0.08
12-13950EniExxonTrieste
Ten 33.0° API, 0.43% S, TAN=0.05
No cargoes

Christina Katsouris, London