Oil traders are struggling to sell West African crude oil as the coronavirus slashes demand from China and European refiners balk at purchases because of weak margins.
About 70% of April-loading cargoes from Angola and Nigeria have yet to find buyers, a marked decline from the normal pace of sales. The unsold lots will be competing against millions of barrels that were slated for export this month but have yet to be purchased.
The distances involved in transporting West African crude to Asia mean barrels exported in April likely wouldn’t reach China until May or even early June. That means traders need to evaluate what Chinese demand will look like several months in the future. There are tentative signs that China’s economy is picking up, but activity remains muted.
Demand for crude to be shipped to China has fallen dramatically in recent weeks due to the coronavirus. West African flows this month are expected to slump by a third, according traders of the region’s barrels. On top of that, weak European oil refining margins are depressing purchases.
Most of Nigeria’s April export program is unsold, while about half Angola’s planned shipments for next month have yet to find buyers, according to two traders who specialize in West African grades. They estimate that 55 Nigerian cargoes and 18 Angolan have yet to find buyers.
The two nations are due to ship almost 100 cargoes next month, meaning the rate of unsold consignments is about 70%. By this time in a normal trading cycle, 50% of the oil should have been sold, the traders said.
The slow sales for April are overlapping with unsold oil for this month. Traders estimate that about 17% of March volumes for Nigeria and Angola haven’t yet been purchased, along with some shipments from smaller producers including the Republic of Congo, Gabon and Chad.