Home Uncategorized US crude import from Nigeria hits 6m barrels high in 5 months

US crude import from Nigeria hits 6m barrels high in 5 months

Oil Prices stabilise, sustained by OPEC production cut

Infrastructure deficit from US Shale hub to key refiners in California has made Nigeria’s crude more attractive to some US refineries.

The US West Coast has imported more than 6 million barrels from Nigeria between April and August this year which is almost four times higher than the amount for all of 2018.

According to reports, more Nigerian oil is increasingly heading to Los Angeles refineries due to limited pipeline link from Shale production but report fears the favourable export window may soon shut

The report said that Nigeria’s oil earlier displaced by U.S. shale, has found an unlikely new outlet this year to the coast of the continental United States that is farthest from the Nigeria’s shores.

The shale boom has upended the global market, turning the United States from a keen buyer of Nigerian oil to an aggressive competitor.

But no pipelines easily connect the shale hub at the Permian basin, located in Texas and New Mexico, to the West Coast, driving the latter to look to Nigeria to quench its thirst for crude.

Early this year, Californian refineries began loading up on Nigerian oil taking cargoes of Qua Iboe, Bonga, Erha, Forcados and others, according to traders and Refinitiv Eikon data.

The route is relatively rare for cargoes that must weather the 20,000-km (12,500-mile), 40-day journey from Nigeria’s lush coasts, around South America’s Tierra del Fuego and up to Los Angeles.

Marathon Oil at its Long Beach refinery has been the most consistent buyer, with another very large crude carrier (VLCC) full of Forcados oil departing Nigeria on Thursday.

Traders said a combination of market factors including the difficulty and expense of getting U.S. crude oil to the West Coast made Nigerian grades attractive.

“It makes more cost sense. Even if U.S. crude is closer on the map, when you factor in the price and availability of taking in barrels from Louisiana or Nigeria, Nigeria came out cheaper,” one seller of West African oil said.

The purchases are a rare glimmer of hope this year for Nigerian oil, which now competes with U.S. shale for buyers, including in its top outlet, India.

The United States had historically been a heavy importer of crude oil, but shale production, coupled with the lifting of a four-decade export ban, transformed it into a net exporter of oil and fuels by late last year.

Barrels from this U.S. oil bonanza sailing to domestic shores face added costs, however, due to a century-old law called the Jones Act, which mandates that only U.S.-flagged vessels can transport it.

The restriction often makes freight within the United States more costly than much longer journeys.

But traders warn the surprise opening of the West Africa-West Coast export window, or arb, could be short-lived due to the timescales and distance involved, according to Reuters.

“The arb may be already shutting. The price factors which made a cargo exporting today look like a good deal would have been happening over a month ago when the deal was made,” a major buyer of West African oil said.

“They won’t be the same today and certainly won’t be the same over a month from now when the cargo arrives.”

The need to refine oil into low-sulphur shipping fuels in time for stricter environmental rules on January 1 may also have lured those cargoes, as West Africa is home to the kinds of crude most suited to such products. This boon could be fleeting too.

“The honeymoon will be over in a year from now,” said Ehsan Ul-Haq, lead analyst with Refinitiv.

“At present, all refiners are desperate to produce marine gasoil or very low-sulphur fuel oil. Once the market reaches equilibrium there will be less interest.”

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