It would be
recalled that in 2012, the US and European Union imposed sanctions on Iran’s
energy and financial sectors, and the country’s oil exports have been cut nearly
in half as a result, according to the US Energy Department. Analysts said the
nuclear deal between Iran and the world powers had raised the prospect of a
fresh oil glut further pressuring prices and increasing competition among
suppliers.
Mr. Dolapo Oni, who is the Head of Energy Research at Ecobank
Capital, said that with the deal signed, the Nigeria would be moving to
conclude negotiations to dispose of crude in its floating storage, estimated at
about 40 million barrels. According to him, the sale would be on a spot basis
and could be heavily discounted to penetrate the highly competitive market in
Asia.
Mr. Oni
added: “I suspect the top targets will be India and
Indonesia, who are also top buyers from Nigeria. These two countries are heavy
buyers of Nigerian spot cargoes, which are having a bad time in the market so
far in 2015. This could considerably displace Nigeria’s August/September
cargoes, while as exports resume, another few hundred thousand barrels may hit
the market on a consistent basis. This could have a longer term impact of
knocking some spot cargoes (including those of Nigeria) out of Asia with the
region’s oil demand still weaker than expected.”
Oni said
this could mean Nigeria would have to accept further discounts on its crude oil
cargoes to find markets for them.
He said: “We will also have to accept that some of our cargoes may
clear the market a lot later than usual. This could impact negatively on
revenues in the second half of the year.
The major
impact is really the extent to which the market prices in the additional
capacity once full exports resume. The new supply could keep prices below $60
for quite a while, barring any major geopolitical event/supply shocks.
Ms. Temilade Esho, who is an analyst for Oil and Gas Africa at
Renaissance Capital, told our Tectono that
the major implication would be the further fall in oil prices.
In Ms.
Esho’s words: “Iran could add a significant amount of stored
oil to the global supply which will cause a fall in oil prices. This is favourable
to the new OPEC strategy as this could force some shale producers out of
business. Nigeria will have a tough time looking for new markets in Asia and
Europe with this new influx of supply.”
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