Nigeria’s Bonny Light is defying the price slash strategy intended to attract buyers just as refineries in India are adopting production cuts and European plans are contemplating shutdown.
As the world awaits the biggest oil glut in history with the plan of Saudi-led OPEC+ to flood an already saturated market with 2.6 million barrels per day (bpd) beginning from April, there are fears that supply will outstrip demand by almost 6 million bpd this year.
“…the world currently has around 7.2 billion barrels crude and products in storage, including 1.3 billion to 1.4 billion barrels currently onboard oil tankers at sea. We estimate that, on average, 76% of the world’s oil storage capacity is already full,” says Oil & Gas Middle East.
Nigeria marked down its crude grades, Bonny Light and Qua Iboe, by “$5 a barrel to date Brent minus $3.29 and minus $3.10 per barrel,” a statement from the state-owned Nigerian National Petroleum Corporation (NNPC) said six days ago.
Timipre Sylva, Minister of State for Petroleum told Bloomberg that Nigeria’s best bet in the face of the steep fall in global oil demand was to reduce its oil price and pump oil as much as it could.
Traders disclosed to Bloomberg the huge probability of Nigeria finding it hard to sell its April cargoes amidst considering increasing oil demand plunge and the fact that other oil producers are reducing their prices.
Currently, several oil producers are selling at below $20 per barrel.
Nigeria’s Bonny Light was offered at $22.48 and Qua Iboe $27.12 at 03.51 West African Time Sunday morning.
Prices of all oil grades have been negatively affected by the downtrend yet light and medium sweet grades have the highest vulnerability in the sense that demand for them is the lowest among buyers.
By implication, countries like Nigeria, Kazakhstan and Azerbaijan, who are active in this market, have a bleaker outlook.