U.S Crude Puts Squeeze on Nigerian Exports

Just as it was all looking on the up for Nigerian oil exports, it looks now as though India, one of the country's biggest export partners, has fallen out of love with West African crude.

According to a report on Platts, India's leading oil company, Indian Oil Corporation, has issued a tender for a whopping Suezmax (the largest ship measurements capable of transiting the Suez Canal in a laden condition) of US crude along with the same quantity of Nigerian crude. Ordinarily not much to raise an eyebrow, but we learned earlier this week that India also expects another delivery of crude cargo containing around 2.2 million barrels to make ground by the end of October.

Indian Oil Corporation, the country's most prominent refiner, joins other state-run firms like Bharat Petroleum Corp. Limited (BPCL) and Hindustan Petroleum Corp. Limited (HPCL), once prime buyers of Nigerian crude, in moving towards the import of US product.

So what can Nigerian firms to make sure their product doesn't get dumped? Well actually, it looks like the Aiteos, Orantos and Seplats could find that solace lies in the very cause of their problems: the USA. For the time being, the US actually offers a good market opportunity for Nigerian exports. Nigerian already sends 17 percent of its crude exports to the US, so there is in fact a reverse flow of trade going from Nigeria to the US.

Since the US started exporting its crude, its opened up a market opportunity for foreign producers and Nigeria's exports to the US have increased noticeably since 2015.

The slightly quieter export market, with India's demand falling for the moment, might be helpful to some of the indigenous firms. Security concerns and damage to oil infrastructure remains the thorn in the side of consistent output in the Niger Delta. Earlier in the month, Aiteo said repair works and security upgrades on its Trans Niger Pipeline were ongoing and did not give a date for their completion. Aiteo have done a huge amount to protect their infrastructure from security concerns, so the disruption must be frustration. Though it will be good news that Royal Dutch Shell has now said it has lifted the force majeure imposed on Bonny Light crude oil exports a month ago.

Still, Aiteo Group may at least be able to fix the roof whilst sales are slower and make sure all is working well before demand increases again.

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