Nigeria faces a dire crude oil pricing situation next month as four of the nation’s 33 crude grades are scheduled to be sold at discounts of more than $5per barrel to Dated Brent.
Already, the Nigerian National Petroleum Corporation (NNPC) has released its crude official selling prices (OSPs) for May.
In the newly released OSPs, the corporation further cut the prices of Nigeria’s grades and they are to be sold at higher discounts than what obtained in April.
If the prices of oil and especially Dated Brent do not improve by May, then some Nigerian crude grades could go for less than $10.
On Tuesday, Benchmark Brent crude settled up 47 cents, or 2.3 per cent , at $20.46 a barrel, following a 6.8% slide on Monday.
In the NNPC OSPs for May, Qua Iboe’s price was slashed by 82 cents from the April rate to a discount of $3.92 per barrel to Dated Brent. Forcados’ price was also further reduced by 91 cents to a discount of $3.91 to Brent.
Bonny Light and Brass River grades were cut by 66 cents to discounts of $3.95 and $3.82 barrels respectively.
Egina is to be sold at a discount of $2.49 per barrel while Agbami and Akpo prices were cut by $1.30 and $2.38 to $5.30 and $6.38 discounts below the Brent.
Sweet Eremor was slashed by $3.53 barrels to a discount of $7.53 barrel, the lowest value for the 33 grades listed.
Ima was also cut by $1.94 to sell at a discount of $5.94 to Dated Brent.
The highest priced grades are EA Blend and Okwuibome at $1.51 and $1.69 discounts respectively.
OSPs are usually published between 15th and 25th of the month.
Prospects for a price rebound in the coming months are bleak as there is an oil glut caused by a near total stoppage of economic activities worldwide because of the Coronavirus epidemic which has paralyzed the tourism and industrial sectors of most economies.
Also, the raging oil war between Russia and Saudi Arabia has not helped matters.
An oil expert in a top rated oil company in Nigeria told THE WHISTLER, “the oil storage system is full and for the foreseeable future, demand will stay low and could take eight months to one year for demand to rise to acceptable levels.
“OPEC cuts which are designed to shore up flagging prices are not enough because of the glut and storage challenges, therefore it will help shore prices up by only few dollars.
“Shutting in Nigeria’s production will not solve any problems as the producers have to make cost oil. Restarting after shut- ins will be an uphill task because we haven’t killed the cost elephant in the room. Furthermore the producers still need cost oil to cover minimal costs. And it’s not a force majeure situation.
The expert who asked not to be named further explained, “The market can do absolutely without Nigeria’s input as was seen after adjustment of prices post the Yemeni attack on Saudi oil, which saw the market lose 5 million barrels per day for a while. In any case, Nigeria’s production is equal to or less than the amount by which Saudi is increasing production in its war with Russia. So it’s foolhardy.
The source suggested solutions, “ One would look to cancel all brokerage contracts which are political settlements, reorganize NNPC now that there’s an opportunity to, cut production and negotiate with oil majors to keep afloat, etc.
“The country must freeze all social projects that are not economically driven, and prepare for headwinds which have come.
“Negotiate for debts which can be settled with oil etc…
“The economists should be brought in and all the Bretton Woods friends have to be brought into the room to help. There’s very little wiggle room.
“Remember also that if you shut in, the life blood of the nation is over. NNPC Must Then CLOSE.
“Bear in mind that the banking sector is teetering due to exposure to oil and gas so whatever it takes should be done.”
