Report: Oil traders raise concern as NNPC changes price model for crude supplies

Crude oil traders have raised concerns about Nigerian products after the Nigerian National Petroleum Company (NNPC) Limited changed its price model to supply the commodity.

This is according to a Bloomberg report on Tuesday which said NNPC is planning to adopt a price model that will result in pricing crude supplies against the monthly average of dated Brent — which is the physical crude benchmark.

The publication said NNPC disclosed this in a circular, revealing the state oil company is ending the pricing model based on dated Brent average settlement in the five days after loading.

NNPC did not respond to an enquiry regarding the price change.

While NNPC did not give reasons for the switch, the oil firm said it would stick to initial nominated loading dates for pricing purposes.

Traders, according to the report, are worried about the changes, expressing concern that the cargoes could be more prone to volatility similar to bigger oil markets.

The decision will also make it more complex for the traders to compare cargoes from the Mediterranean and North Sea, as well as WTI Midland, to NNPC shipments to Europe.

Nigerian crude has been recording increased demand in Europe due to the embargo placed on Russian oil by the European Union due to the invasion of Ukraine.

In November, Maryamu Idris, executive director, crude and condensate, NNPC Trading Limited, had said Nigerian crude oil grades have become a steady preference for many European refiners.

Idris said six months before the war in Ukraine, 678,000 barrels per day (bpd) of Nigerian crude grades went to Europe — compared to 710,000 bpd six months later and 730,000 bpd so far this year.