imports of Nigerian crude oil by the United States grew significantly in the first three months of the year, after plunging to record lows in recent years on the back of the US shale oil boom.
The US imports of Nigerian crude, which has come under pressure since the start of the decline in global oil prices, rose by 577.8 per cent to 26.3 million barrels in the first quarter of 2016, compared to 3.88 million barrels in the same period last year, latest data from the Nigerian National Petroleum Corporation showed.
In February this year, the US imported almost as much as India, which in 2013 became the single largest importer of Nigerian crude after the US slashed its imports.
The US bought 12.12 million barrels of Nigerian crude in the month, making it the second largest buyer of the country’s crude after India, which imported 12.69 million barrels.
From 2004 to 2007, Nigeria exported over one million bpd to the US, but a surge of the US domestic production that is of similar quality, including shale oil, later forced African light sweet crude producers, especially Nigeria, to find new destinations for their exports.
Confirming the surge in the US imports of Nigerian crude in the first quarter, the Organisation of Petroleum Exporting Countries, in its latest monthly oil report released on Monday, said by the end of the first quarter of this year, the Brent-WTI spread shrunk to $1.70 per barrel, from a yearly average of $4.80 per barrel in 2015.
Brent, the global oil benchmark, is the price against which Nigeria’s oil is measured, while the West Texas Intermediate is the US benchmark.
OPEC stated that the significant reduction in the Brent’s premium to the WTI had made it possible for the return of light sweet West African grades to the US market.
It stated, “Such an arbitrage has not been attractive in recent years due to the US shale oil boom, which has made domestic WTI-priced crude far more competitive compared to similar Brent-related crudes.
“In the first quarter of 2016, the combined average imported US crudes from the two main WAF crude exporters – Nigeria and Angola – jumped to 354,000 barrels per day from about 190,000 bpd in 2015.”
The arbitrage economics also worked with several other Atlantic Basin crudes – even sour grades such as Urals – that have not been feasible for years due to the growing Canadian heavy crude exports to the US and the wide Brent-WTI spread, OPEC said in the report.
According to the NNPC, Canada also increased its imports of Nigerian crude by about 261 per cent in the first quarter of this year, compared to what it bought in the same period in 2015.
The North American country imported 6.86 million barrels of Nigerian crude from January to March, up from the 1.9 million barrels it bought in the same period in 2015.
The recent upsurge in attacks on oil and gas facilities in the Niger Delta may have spoiled the party for Nigeria, which has seen drastic reduction in its crude oil production.
Last week, it was reported that the heightened uncertainty about deliveries had dampened the appetite of some US and Indian refiners for the nation’s crude oil.
Three of Nigerian oil grades – including the largest stream, Qua Iboe – have in the past month been under force majeure – a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.
The state-run Indian Oil Corporation Limited – a major buyer of Nigerian grades over the past year – has stated in its recent tenders that it will not take grades under force majeure.
Even refineries on the US East Coast, which have been on a buying spree for Nigerian crude in recent months that averaged 240,000 barrels per day in April and May, according to Reuters shipping data, are starting to turn away.
The reduced demand means Nigeria is not benefiting as much as others from a rebound in Brent crude prices, which is partly driven by its own oil outages.