Nigeria close to maximum crude oil exports

Catogory : Announcements

From a low of 1.3M b/d in March, Nigerian crude oil production has improved in each subsequent month to reach an estimated 1.8M b/d in September. Despite being exempt from the initial OPEC-led deal to curb production from 1 January 2017, and despite having produced around 2.2M b/d as recently as 2012, Nigeria has indicated that it is prepared to cap its production at 1.8M b/d, suggesting that Nigerian output has peaked for now. As the Nigerian oil minister Emmanuel Ibe Kachikwu indicated last month, this restraint is only partly due to a recognition of the necessity to curb production in a market sagging under the pressure of historically high inventories. While no export streams are currently subject to force majeure, the years of militant disturbance inflicted considerable damage on Nigeria’s oil infrastructure, which will take time to repair.

Although Nigerian output growth may have reached its ceiling this year, Nigeria remains an important lure for tanker owners who see it as part of the buoyant Atlantic Basin crude oil export market, also led by the United States, Libya, Canada and Brazil. This region is currently regarded as the best trading option for large tanker owners because of the disproportionally negative impact on cargoes out of the Arabian Gulf due to the OPEC-led deal to cut output.

Nigerian crude oil exports have gradually recovered from the low point in March. The chart also shows how exports are shared between the VLCC and Suezmax sectors. Although the Suezmax sector is dominant, accounting for an average of two-thirds of all liftings, this does not tell the whole story. At the end of Q1, the VLCC share of the Nigerian market increased to 40%, with owners targeting West Africa as OPEC cutbacks first started to bite. Our latest data reveals that a second surge in VLCCs into the region is currently underway. Our analysis of AIS data at the end of September revealed that 45 vessels were heading in ballast for the Atlantic Basin, the highest level recorded this year. With 35 Suezmaxes also confirmed to be ballasting back to the Atlantic, up from 22 at the end of August, there is the potential for significant tonnage oversupply in the region, which could serve to dampen rates over the next few weeks.