Nigeria is losing the United States as its biggest oil customer amid surging output and refinery closures in North America, prompting Africa’s top producer to ship its crude twice the distance to Asia.
U.S purchases of Nigerian crude fell to a five-year low in February, knocking the OPEC member to sixth from fifth among suppliers to the world’s largest oil consumer, Energy Department data show, Bloomberg reports.
To offset the trend, the country is sending cargoes to Asia, where refiners are set to increase imports in June to the highest in a year, according to data compiled by Bloomberg.
Qua Iboe, a light oil that’s Nigeria’s most abundant grade, slumped to an 18-month low in April as buyers in Asia that typically use cheaper, heavier crudes, demanded price cuts to cover the cost of shipping it halfway around the world.
The voyage from the Bonny Terminal in Nigeria to Tianjin, China, is 12,172 miles, compared with 5,847 miles to New York Harbour.
“It’s a very plausible scenario that one day the U.S won’t need to import crude oil from Nigeria,” said Olivier Jakob, managing director at Petromatrix, a Zug, Switzerland-based consultant. “The U.S is awash with light crude. Nigerian crude may need to be priced at a discount to go to new markets in Asia.”
Boosted by drilling in shale-rock formations such as North Dakota’s Bakken and Texas’ Eagle Ford, crude production in the U.S rose to 6.24 million barrels a day in the week ended May 18, the highest level since 1999, government data show. The country’s Nigerian oil imports fell to 352,000 barrels a day in February, about a third of the amount purchased a year earlier, according to the Energy Department.
Refiners are closing plants on the U.S East Coast, the main destination for Nigerian exports, amid falling returns. Sunoco idled the 194,000-barrel-a-day Marcus Hook plant in Pennsylvania on December 1.
The company also said it would decide by July whether to halt production at its 355,000-barrel-a-day Philadelphia plant. ConocoPhillips stopped its 190,000-barrel-a-day Trainer, Pa., site on September 30. The facilities together account for half of East Coast processing capacity.
“The U.S. is losing its position as a lead buyer of Nigerian crude,” said David Wech, an analyst at JBC Energy in Vienna.
The slide in Nigeria’s status as a U.S. supplier marks the decline of a relationship that dates from 1961, when Texaco Overseas began operations in the African producer. The country kept up exports to the U.S even as attacks by militant groups in the Niger Delta cut output by more than 28 per cent from 2006 to 2009.
Reduced U.S demand still hasn’t curtailed Nigeria’s exports. Crude and condensate sales are on course to rise to 2.27 million barrels a day next month, close to their highest level in 10 months, according to loading programs obtained by Bloomberg News.
Demand for Nigeria’s oil may also be supported by South Africa as it seeks replacement sources amid international sanctions against Iran.
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