A few cargoes are said to be heading to US refineries from Nigeria, trading sources said at the weekend.
Two Nigerian grades, including at least two cargoes of flagship crude Qua Iboe as well as Bonga, were said to be heading to US east coast refineries as well potentially down to the US Gulf Coast, traders said.
“It is bits and pieces, not massive flows,” one crude trader told US-based energy publication, Platts.
Exports of Nigeria’s major crude grade, began declining rapidly from July 2014 to zero level by the end of last year following increased shale oil production by the US.
India and Europe have emerged as the largest markets for Nigerian crude, while the OPEC member still struggles to dispose of its oil to the US leading to a growing overhang of unsold Nigerian cargoes but there seems to be changing fortunes for the country’s crude.
One cargo of Nigerian crude is heading over regularly to the Delta Airlines refinery in Trainer, Pennsylvania, while Philadelphia Energy Solutions (PES) was also heard to have bought Nigerian crude, including an end-September loading cargo of Bonga and, potentially, a cargo of Qua Iboe.
Shipping fixtures seen by Platts showed PES, Exxon and Statoil chartering vessels to take West African barrels to the US for end-September loading cargoes, and traders have said Vitol’s October 3-4 loading Qua Iboe cargo was also heading to the US.
Traders cited the narrower Brent/WTI spread and good US refining margins as the main factor pulling Nigerian barrels.
“I think Qua works because of the arb and margins,” a crude trader said. “The arb is low enough for [refineries] with good jet margins to buy it.”
While flows of Nigerian crude to the US during June and July were partly driven by high prices for domestic light sweet crudes, such as Louisiana Light Sweets, that has not been the case for the recent moves.
“US grades have really been sideways all week,” said one US crude trader. “The biggest change has been in the arb.”
The spread between Brent and WTI has narrowed over the past week, with the October contracts’ spread as narrow as $2.96/b, the lowest since June 30.
European refiners have been the main buyers of Nigerian crude in October so far due to good refining margins on the continent but other light sweet crudes in the North Sea and Mediterranean are coming off and could compete, traders also told Platts.
As a result, Nigerian crude could continue to flow to the US, traders said, especially as values were starting to come under pressure again with November’s program likely due out next week and at least 30 million barrels still available for October.