Nigeria’s Unsold Crude Glut: What’s Behind It?

Nigeria is struggling to find buyers for its oil as strikes in the French refining sector and seasonal maintenance at other European plants reduce demand for the OPEC producer's exports.

Between 20 and 25 shipments of Nigerian crude scheduled for April loading are still awaiting buyers, according to four traders specializing in the West African market. This is an unusually weak position for this time of year, as trade should typically be shifting to May's barrels, and the prices for these shipments are falling. Each cargo carries around one million barrels of crude.

France, typically one of Nigeria’s largest oil buyers, imported an average of 110,000 barrels per day of Nigerian crude last year, according to tanker tracking data compiled by Bloomberg. However, demand has slumped this month, with France’s overall crude imports dropping by 50% in March due to nationwide strikes over pension reforms, according to Wood Mackenzie.

More than 80% of France’s 1.1 million-barrels-per-day refining capacity is currently offline or in the process of shutting down because of the industrial action, according to data compiled by Bloomberg.

In addition to the impact of the strikes, other refineries in Europe are also reducing crude purchases due to seasonal maintenance, the traders said. Capacity has been offline at several key destinations for Nigerian crude, including Spain’s San Roque refinery and Italy’s Sarroch plant. Other facilities, such as Shell's Pernis refinery near Rotterdam, Europe’s largest, have also reduced operations for maintenance.

"The Nigerian backlog is a combination of higher freight costs, lower tanker availability—specifically to Europe—and a drop in overall demand for West African light sweet crude as supplies from other regions flood the market," said Viktor Katona, lead crude analyst at Kpler.

The reduced demand from Northwest Europe is significant for West Africa, as alternative markets are limited, traders noted. Mediterranean refiners can opt for cheaper North African crude, which is quicker to transport, or process some of the large volumes of U.S. West Texas Intermediate crude that have been arriving in Europe recently.

Long-distance buyers, such as Indian Oil Corp. and Indonesia's Pertamina, have been purchasing more Russian crude this year, reducing their need for Nigerian supplies. China's Unipec has been favoring Angolan crude, with at least five shipments still available for April, according to the traders.

Another factor contributing to the unsold cargoes is Nigeria’s recovery in crude production, which had been hampered in recent years by theft and technical issues, such as with the country’s Bonny Light stream. Nigeria’s export capacity may now exceed market demand for April and May, Katona added.