The Nigerian National Petroleum Corporation (NNPC) has delayed publishing its future oil export plans so as to conclude discussions with International Oil Companies (IOCs) and their local counterparts about how to cut output in line with a global deal on production curbs, trading sources have said.
Official selling prices (OSPs) for Nigerian oil, usually issued in the second or third week of each month, had still not been issued as of yesterday. The global supply deal, agreed by the OPEC+ group of oil producers, is due to go into effect on Saturday, May 1.
Traders of Nigerian oil told Reuters that the country had revised its May programmes for oil cargoes and would also have to lower its output in June, based on the OPEC+ deal. “May cargoes will get delayed and new June cargoes may be relatively few,” one of the sources said.
OPEC, Russia and other allied producers agreed to cut their combined output by 9.7 million barrels per day, or each reducing its production by more than 20 per cent. The first round of cuts will run in May and June.
“The NNPC is working out the cuts for the international oil companies. That’s why the programme for June and OSP for May is yet to come out,” another trading source said.
The NNPC, which has not issued any public notice of delays or output cuts, needs to discuss reductions with companies working in the country, including oil majors, Royal Dutch Shell , BP, Exxon Mobil, Eni and Chevron.
Two industry sources said talks ranged from a blanket percentage output cut for all players, to focusing the output curbs more on offshore fields that are not run by a joint venture with NNPC.
Brent crude, the benchmark against which Nigerian oil trades on the global market, fell to its lowest in two decades last week before staging a modest recovery. Brent was trading around $20 a barrel yesterday.
Traders said Nigeria’s key crude grade, Bonny Light was being offered at as low as dated Brent minus $5, compared with a premium of $3 in more normal market conditions.
Surging inventories, as demand for oil has tumbled due to global measures to fight the coronavirus, have made it a challenge for some producers to find buyers for their oil.
At least three dozen Nigerian crude cargoes are still available for export in April and May and the country has minimal domestic storage.
NNPC’s Group Managing Director, Mele Kyari said last week that Nigeria had to cut output because of scarce storage capacity.
In addition, major markets, such as Europe and Asia, spurned West African crude in favour of oil from producers that lie closer to them, cutting down on shipping times amid the market uncertainty and reducing freight costs.
