Nigeria has discounted its May crude, crashing the price of most of its grades, which traded yesterday, to $10 perbarrel. Though the Minister of Finance, Budget and National Planning, Hajjia Zainab Ahmed, declared during a web conference on Tuesday, the plan to slash the benchmark for the com-modity to $20 per barrel in the 2020 budget, the buyers’ apathy, buoyed by glut in the market had, according to investigation by New Telegraph, forced price of the commodity down through a discount to $10 per barrel.
This is coming just as one of the country’s Tier 2 banks, FCMB, restructured its loans over oil price crash and novel coronavirus outbreak. Even at that, some traders, according to a market survey, still said that the prices might still not be cheap enough as glut, which pushed buyers’ apathy to its record low, remains. Africa’s biggest crude exporter, Nigeria, had released the prices for most of its crude oil grades for sale in May and the figures reflected an urgent need to offload cargoes in what is a highly competitive marketplace. Even so, traders cautioned that the prices – $10 a barrel or less if the market doesn’t improve – still may not tempt enough buyers because of the demand collapse triggered by COVID- 19.
“The oil price crash isn’t getting any easier for Nigeria,” Bloomberg said in a report, which validated what industry sources told this newspaper about the worsening glut. Africa’s largest economy is particularly vulnerable to the oil-price rout that’s been brought about by the disease.
The country, which has a fiscal breakeven well above $100 a barrel, mostly sells very light crudes that are low in sulfur – a similar variety to those that the U.S. produces in abundance these days. “Worse for Nigeria, it lacks the space to store unwanted supplies at a time the cost of hiring ships to take its supplies to importers has soared because many tankers are being used for floating storage,” Bloomberg added. Like many oil producing countries, Nigeria sells its crudes at differentials to benchmarks. For the West African country, that marker is Dated Brent, published by S&P Global Platts. The measure stood at $14.68 a barrel penultimate Tuesday.
Two of Nigeria’s banner grades – Qua Iboe and Bonny Light – will sell at discounts of $3.92 and $3.95 respectively to Dated Brent in May, according to a price list. Both are more deeply discounted than they were in April when prices were already staggeringly cheap by historical standards. Majority of the country’s grades will be sold for at least $3 a barrel below the benchmark next month. Two traders said that the prices still won’t be cheap enough for Nigeria to sell its excess cargoes, a third said the discounts may be attractive enough to lift sales. The release of the Nigerian official selling prices was about a week late, while loading plans for June have started to emerge several days later than normal.
The nation’s exports of Qua Iboe crude oil for May have been revised lower to 153,000 barrels a day from the previously planned level of 215,000, while June’s shipments are set at 158,000 barrels a day, according to loading schedules compiled by Bloomberg. The loadings are the lowest for the grade since September 2016.
The dire state of the oil market meant that, despite being so cheap – $50 or $60 a barrel would have been realistic just a few months ago – Nigerian barrels have been selling slowly. Traders estimated that, as of late last week, about 30 out of 65 May-loading cargoes still hadn’t been sold. Normally just a handful would still be available so late in a month.
Meanwhile, oil rose above $31 a barrel yesterday as hopes for a recovery in demand as some countries ease coronavirus lockdowns offset a report showing a higher-than-expected rise in U.S. inventories. Brent crude has almost doubled since hitting a 21- year low reached on April 22, supported by expectations demand will recover and by a record supply cut led by the Organisation of the Petroleum Exporting Countries (OPEC). Brent LCOc1 was up 79 cents, or 2.6 per cent, at $31.76 a barrel at 0930 GMT, having risen in the past six sessions.
West Texas Intermediate (WTI) crude CLc1 added 88 cents, or 3.6 per cent, to $25.44. “Clearly, the optimism of the re-opening of the global economy has supported the oil rally,” said Naeem Aslam, an analyst at Avatrade.
But in a reminder that a supply glut persists, the American Petroleum Institute said on Tuesday that U.S. crude inventories rose by 8.4 million barrels last week, more than analysts expected. “We’re talking about normalisation of supply and demand but we’ve got a long way to go,” said Lachlan Shaw, National Australia Bank’s Head of Commodity Strategy. Meanwhile, First City Monument Bank (FCMB) Group Plc.
plans to restructure half of its loans after plunging oil prices, coronavirus lockdown and a naira devaluation hindered the ability of the Nigerian bank’s clients to repay their debt. Credit facilities across industries ranging from oil and gas to small- and medium-sized enterprises will be reorganised, the Lagos-based lender said in a presentation on Tuesday. New terms will include a six-to 12-month moratorium on principal debt repayments and an extension on loan maturities of up to two years.
The measures by FCMB came after impairment charges surged 61 per cent to N3.7 billion ($9.6 million) in the first quarter, according to a filing to the Nigerian Stock Exchange. Loans in the period rose seven per cent to N764.3 billion from a year earlier.
Source: New Telegraph