Following the cessation of hostilities by militants in Nigeria’s Niger Delta region, and as the nation struggles to regain its share in the global oil market, a new report says world market is scared that the country which recently resumed oil export might flood the market with products, thereby further crashing oil prices.
This month and in November, Nigeria is expected to pump about 1.7-1.8 million barrels a day, up from a three-decade low of 1.39 million barrels a day in August.
A recent International Energy Agency, IEA report posits that although the market is now re-balancing itself with OPEC promising to agree on cut, “we must not forget that there are large volumes of shut-in production, mainly in Nigeria and Libya that could return to the market, and the strong start for oil demand growth seen this year might not be maintained,” the body said.
As the oil market gets filled up with cheap oils competing for buyers, Nigeria was forced to cut the price of every type of crude it sells in an effort to regain share of the global energy market.
The cut in price comes at a time when the Nigerian National Petroleum Corporation, NNPC, said there was a “huge” glut of cargoes on ground to be sold.
The NNPC was said to have lowered by at least $1 a barrel its official selling prices (OSPs) for 20 out of 26 oil grades, according to pricing lists.
Qua Iboe, Nigeria’s largest export crude was reduced by the most since 2014.
The price reductions are due to a “huge cargo overhang” as the country attempts to regain market share, Mele Kyari, Group General Manager for the Oil Marketing Division at NNPC, said.
“It is a bearish signal for the light, sweet market,” Eshan Ul-Haq, principal consultant at KBC Process Technology Ltd., said, reacting to the news and referencing the types of crude Nigeria mostly pumps. “In order to capture a higher share of the market, OSPs have to come down.”
NNPC cut the selling price of Qua Iboe for November to a 17 cent premium to the benchmark dated Brent, according to the price list, from $1.07. It reduced the price of Bonny Light to a 7 cent premium and Forcados to a 41 cent discount to dated Brent.
Libya, another OPEC member, is also producing more. The country’s National Oil Corp. said last week it was pumping 560,000 barrels a day, which would be the highest level since November 2014, data compiled showed.
In Kazakhstan the first barrels from the $50 billion Kashagan field have started to flow while Russian production is running so far this month at 11.2 million barrels a day, up about 100,000 barrels a day from last month and roughly 500,000 barrels a day higher than in August. The Russian increase in two months is equal to the output of OPEC member Ecuador.
The flood of crude into Europe is at odds with comments from Khalid Al-Falih, Saudi Arabia’s Minister of Energy and Industry. The oil market is “clearly rebalancing,” bringing the industry to the end of a “considerable downturn,” he said at a conference in London on Oct. 19.
The weakness in the so-called time-spreads for Brent contrasts with a rally in headline prices above $50 a barrel as speculators bought in after OPEC surprised traders by announcing the outline of a production cut in Algiers last month.

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