Bloomberg: Nigeria cut the price of every type of crude it sells in an effort to regain share of the global oil market at a time when there’s a “huge” glut of cargoes.
Nigeria National Petroleum Corp. lowered by at least $1 a barrel its official selling prices, or OSPs, for 20 out of 26 oil grades monitored by Bloomberg, according to pricing lists. Qua Iboe, Nigeria’s largest export crude under normal circumstances, was reduced by the most since 2014.
The price reductions are due to a “huge cargo overhang” as the country attempts to regain market share, Mele Kyari, group general manager for the oil-marketing division at NNPC, the state oil company, said by phone.
Like every other producer country, Nigeria is grappling with prices that are less than half what they were in July 2014. What makes the African nation’s situation more acute is a militant campaign that resulted in export flows falling to the lowest in at least 9 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.
“It is a bearish signal for the light, sweet market,” Eshan Ul-Haq, principal consultant at KBC Process Technology Ltd., said in an e-mail, referencing the types of crude Nigeria mostly pumps. “In order to capture a higher share of the market, OSPs have to come down.”
Brent crude futures slumped as much as 2.7 percent to $51.27 a barrel, the largest intraday decline since Sept. 27. They were down 2.2 percent at $51.51 at 3:49 p.m. on the ICE Futures Europe exchange in London.
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. It reduced the price of Bonny Light to a 7 cent premium and Forcados to a 41 cent discount to Dated Brent.
Five companies that market the nation’s crude have raised the issue of high official selling prices, Kyari said earlier this week. He said Thursday that the pricing decisions were unrelated to those “complaints.”
The changes to November prices have brought them back to accurate market levels, according to a survey of four buyers of West African crude after the numbers were published.
The reductions take place as the Organization of Petroleum Exporting Countries — of which Nigeria is a member — attempts to cut its combined output to 32.5 million to 33 million barrels a day in an effort to steady oil markets. Nigeria has said it will be exempt from any production cuts, though final details of such an agreement have yet to be worked out.
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, according to Ul-Haq.