Nigerian crude oil prices ‘hit 10-year low’

The official prices of the Nigerian crude oil have hit the lowest in at least 10 years, with excess supply overshadowing demand and taking toll on Nigeria’s sweet crude.

Nigeria’s Bonny Light, known to have always been in demand for its high and easy yield of valuable motor fuels, fell to dated Brent plus 23 cents, with the differential below May 2005 levels.

According to Reuters, the Nigerian National Petroleum Corporation (NNPC) lowered the official selling price for its largest crude oil stream, Qua Iboe, to dated Brent plus 35 cents per barrel – the lowest differential since May 2005.

Kash Kamal, a senior research analyst with Sucden, a financial futures and options brokering firm, said Nigeria was playing along with other nations in the Organisation of Petroleum Exporting Countries (OPEC) to reduce price to drive demand.

“They [Nigeria] are playing along now, towing the line with other OPEC members to try and capture market share,” he said.

The country is having a hard time selling its crude with the boom of United States’ (US) shale oil – a country where Nigeria sold about 60 percent of its crude oil until mid-2014.

From about 60 percent of Nigeria’s roughly 2 million barrels per day (bpd) of exports, the US bought about just 60,000 bpd on average for the first three months of 2015.

As US withdrew from buying Nigerian oil, Nigerian crude sellers began seeking other buyers in the Uruguayan and Chinese markets, in stiff competition with other OPEC nations.

This lack of sales has made the much-coveted Nigerian crude to float in millions of barrels without sales in the past few months.

Kash says the situation is really messy and would continue to affect Nigeria as against Saudi Arabia, an influential country in the OPEC community.

“It’s a really messy situation. Saudi Arabia, with a marginal cost per barrel at around $30 and substantial cash reserves, can afford to stick it out with crude at these levels. But Nigeria needs crude around $115-120 to balance their budget.”

According to experts, the prices may not rise anytime soon, except OPEC decides to further reduce supply.