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Nigerian April crude prices face downward pressure from March overhang

London — A growing overhang of unsold Nigerian crude oil cargoes for March-loading could depress values for the April program, WAF crude traders said Monday.

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With the March program in the middle of being loaded at the terminals, pressure is growing on traders to dispose so-called "floating" cargoes which have been loaded before being sold.

"Around 10 million-12 million barrels are currently on the water from the March program," a European refiner said. "The lack of pricing attractiveness for April cargoes is driving sluggish demand at this stage [of the trading cycle]."

Another trader said there was a light sweet crude supply overhang.


In addition, nearly half of Nigeria's April program is still available, according to Platts cargo tracking.

With the May loading schedule expected soon, traders said that competition among sellers could soon become still more intense.

CRUDE OVERSUPPLY TO TIGHTEN WAF SUEZMAX MARKET

Shipping sources said that the volume of Nigerian crude currently sitting in tankers awaiting orders should tighten up the West African Suezmax position list in the coming weeks.

"It might not have an immediate effect on the supply of ships because those ships would have been employed at this time anyway, but if they end up sitting off Nigeria for a long period of time that will have a definite impact," a shipbroker said.

Others said that the impact of the floating crude had already been felt.

"I know of one charterer that has two VLCCs and two Suezmaxes with cargoes on board that haven't found buyers yet.

It has definitely tightened up the WAF position list," a broker said.

The longer that the Nigerian crude cargoes on the ships remain unsold, the longer the ships would be kept off WAF tonnage lists, sources said.

This reduction in the supply of vessels would then likely lead to a rise in WAF Suezmax freight rates.

Suezmax rates on the WAF-UK Continent route, basis 130,000 mt, were assessed Worldscale 5 higher at w105 Friday and market sentiment remained bullish Monday due to high levels of charterer inquiry for April loading dates, and a couple of cargoes still to be covered for March.

"The WAF Suezmaxes are incredibly active as charterers pile in for April dates, March cargoes are going to be very tricky with very little tonnage left," said a shipbroker report.

HIGH FREIGHT RATES DENT WAF DIFFERENTIALS

In addition, stubbornly high freight rates in the Nigerian market over the past week has been having a knock-on effect on already high differentials to Dated Brent in the region, according to market sources.

Traders said that higher crude offer levels in the market, in conjunction with higher freight costs, were discouraging purchases of light sweet WAF crudes such as Nigeria's Qua Iboe, with European refiners turning instead to sweet, short-haul Mediterranean grades such as Azeri Light.

With European buyers apparently showing only limited interest in the Nigerian market because of the high freight rates and high offer levels, most buying of Nigerian grades was coming from Asia.

For most of the past month, Nigerian crude differentials to regional benchmarks have remained high, with significant rises across all grades.

More specifically, the Qua Iboe differential has risen by $1.36/barrel since the start of 2015 to be assessed by Platts Friday at a $1.80/b premium to the Dated Brent benchmark.

--Dimitrios Moraitelis, dimitrios.moraitelis@platts.com
--John Morley, john.morley@platts.com
--Edited by Jonathan Dart, jonathan.dart@platts.com