Nigerian crude differentials for light and medium sweet grades have weakened, hit by soaring freight rates as the escalating US-Iran war disrupted tanker markets.
Traders and market participants that track west African crude markets said shipping costs combined with a backwardation structure in the North Sea market are weighing heavily on fob prices for west African crude, and discouraging trade.
Costs to ship west African crude to Europe and China have hit record highs. The backwardation, where prompt prices are at a premium to forward values, is pressuring demand for long-haul west African crude, as supplies essentially lose value while in transit.
Unsold supply of between 10mn-14mn bl of March-loading west African crude are a further pain point, and this coincides with a time of reduced demand from Europe — the largest buyer of Nigerian crude — where refineries are entering maintenance season.
Traders said any high offers seen in the market will have to massively correct to allow cargoes to change hands.
Lower offers fail to entice buyers
In the 3 March session, ExxonMobil offered Nigerian light sweet Qua Iboe for loading in mid-late March at a small discount to the North Sea Dated benchmark, with trade likely to take place well below those levels.
The firm also sought buyers for medium sweet Erha loading at the end March at a 50¢/bl premium to Dated, and for similar-quality Bonga loading in early April at a $1/bl premium.
As a result, Qua Iboe dropped by 50¢/bl and Erha by 55¢/bl, while other Nigerian grades were assessed 10-15¢/bl lower in the latest session.
The Argus assessment window for Nigerian crude includes cargoes loading 20-45 days ahead.
Market participants said ExxonMobil also offered supplies of Nigerian Cawthorne and Angolan Girassol, but price levels were unclear. The offers were unconfirmed and no deals were heard struck.
