From volumes to sweet grades, Nigeria cedes market to US
Sopuruchi Onwuka
The United States of America, once the key destination of Nigeria’s light sweet crude oil prized in the market for high yield of transportation fuels, is now the nemesis of mainly West African producers of the same grade of oil it formerly imported.
Market consultancy firm, Renaissance Energy Advisors, has declared in its latest report that traders and refiners across the globe have actively diverted attention from West Africa to the United States as the credible source of sustainable supply of sweet crude oil grades.
Besides producing premium light sweet crude oil grades from unconventional shale fracking operations, the industry has also conferred the US with the title of a critical global supplier in the list of the three biggest oil and gas producers in the world.
The US also temporarily occupied the position world’s biggest producer before returning the position to Saudi Arabia, after Russia came under trade sanction by members of the industrialized Organization of Economic Cooperation and Development (OECD) which buys up over 50 percent of the global energy commodities especially oil and gas.
With its rising output levels, the West Texas Intermediate (WTI) crude oil grades which are light and sweet like the West African blends, emerged as the world’s largest freely-traded grade by output and volume.
Renaissance Energy Advisors stated weekend that US has consequently replaced Africa as global oil swing supplier, displacing the West African oil with the WTI Midland at markets between the Atlantic Basin and Asia.
Exports of the grade have swelled by as much as 3.5 million barrels a day since the US lifted a ban on crude exports in 2015, according to estimates from the consultancy. And about 47% of last year’s flows went to Europe while 43% went to Asia.
“As US crude exports have grown, WTI Midland – a light sweet crude – has emerged as the world’s largest freely-traded grade by output and volume,” the London-based consultancy said in a note to clients seen by Bloomberg News.
West Africa was previously the key swing supplier between Europe and Asia, offering a regular source of spot barrels that can be traded east or west depending on demand in each region.
The soaring supplies of American crude have shifted that role to WTI Midland, and this trend has been reinforced by Africa’s under-performing upstream sector. The startup of Nigeria’s Dangote mega-refinery also means more barrels are processed locally, and the giant plant is also importing WTI Midland, the consultancy said.
The dislocation in global crude flows stemming from the European Union’s embargo on Russian crude has also caused WTI Midland to effectively replace Urals as the baseload grade for northwest Europe’s refiners.
WTI Midland’s inclusion in the grades that are allowed to determine the price of Dated Brent — an important oil benchmark — has also elevated the position of the US Gulf Coast as a key center for oil pricing, the note said.
The consultancy expects US crude exports to grow even further out to 2030, with flows set to reach almost 6 million barrels a day by 2030.