The Federal Government which has been experiencing dwindling revenue profile from crude oil sales is in for more trouble as the value of the country’s crude oil has fallen sharply at the international market.
The country has experienced sharp drop in revenue from crude oil of late because of threat from crude oil thieves.
Consequently, the Federal Government is currently losing between 60,000 and 80,000 barrels of crude oil per day to oil thieves which activities has in most cases led to shutting of productionby oil companies.
The price of crude oil in the international market was $113 per barrel, and going by the figures quoted by the President Goodluck Jonathan, the country would be losing between $6.78 million (N1.08 billion) and $9.04 million (N1.45 billion) daily.
Nigerian crude prices fell sharply weekend, according to Platts, as the remaining November cargoes were struggling to attract any interest from European refiners due to low refining margins and far cheaper alternative sweet crudes. Qua Iboe was assessed weekend at Dated Brent plus $2.50/barrel, a fall of $0.59/b from the previous day. This is the lowest premium for Qua Iboe since July 25, Platts data showed.
There were still about sixto seven Nigerian November cargoes left and the offer levels of these barrels had also fallen steadily over the last week. Sentiment was turning very bearish, especially for Nigeria’s flagship grade Qua Iboe.
“Qua Iboe is between Dated Brent plus $2-2.50/b. The European arbitrage does not work until $2/b on my calculations and no one else is going to take barrels now”, said a trader.
A second trader said that the whole Nigerian crude complex was coming down as a result.
“The sweet market is incredibly weak; look at the North Sea and the Mediterranean differentials. West African crudes cannot compete unless it prices down, and Europe has to take barrels asthe East will not. Last I heard some offers were at Dated Brent plus $2.80/b but that is more than a little hopeful, as evidenced by no one taking them out”.
One source said that the Qua Iboe programme was looking very heavy with 12 cargoes for December along with at least three to four unsold November cargoes.
All sources said differentials for all the Nigerian grades had to fall because the other light sweet grades in the North Sea and the Mediterranean had fallen sharply and Nigerian grades would have to do the same to compete and find homes in Europe.
The states have been up in arms against the Federal Government over decline in their monthly revenue allocation.
Information from Business Day was used in this report.