NNPC CUTS DOWN PRICE OF NIGERIA’S CRUDE OIL GRADES

Tectono Business Review gathered that in order make Nigeria crude oil attractive to buyers and to help it recapture its share of the global crude oil market, the Nigeria National Petroleum Corporation (NNPC) has lacerated the official selling price of Nigeria’s crude oil grades

The NNPC lowered by at least $1 a barrel its official selling prices (OSP), for 20 out of 26 oil grades. Qua Iboe, Nigeria’s largest export crude oil under normal circumstances, was reduced by the most since 2014. The NNPC cut the selling price of Qua Iboe for November to a 17 cent premium to the benchmark Dated Brent, according to the price list, from $1.07, while it reduced the price of Bonny Light to a seven cent premium and Forcados to a 41 cent discount to Dated Brent. Brent crude futures slumped as much as 2.7 per cent to $51.27 a barrel, the largest intraday decline since September 27.

They were down 2.2 per cent at $51.51 at 3:49 p.m. on the ICE Futures Europe exchange in London. Mele Kyari, Group General Manager, Crude Oil Marketing Division of the NNPC, stated that the price reductions are due to a huge cargo overhang as the country attempts to regain market share.

Kyari made it clear that five companies that market the nation’s crude oil had raised the issue of high official selling prices, adding, however, that the decision to cut the price was unrelated to those complaints. Like every other crude oil producing country, Nigeria is grappling with prices that are less than half what they were in July 2014. What makes Nigeria’s situation more acute is a militant campaign that resulted in export flows falling to the lowest in at least nine years earlier this year.

Shipments are gradually resuming and lower prices are a sign Nigeria is seeking to become more competitive in an already oversupplied global market. The reductions is coming on the heels of the Organisation of Petroleum Exporting Countries (OPEC) attempts to cut its combined output to 32.5 million to 33 million barrels a day in an effort to steady oil markets. According to a survey of four buyers of West African crude after the NNPC announced the price slash, the changes to November prices have brought them back to accurate market levels.

Eshan Ul-Haq, Principal Consultant at KBC Process Technology Limited, while reacting to the development, said, “It is a bearish signal for the light, sweet market. In order to capture a higher share of the market, OSPs have to come down. Because an OPEC output cut would primarily affect medium and heavy crude grades, lower prices from Nigeria are likely to reduce the price differential between light and heavier oil.”