Amidst heightened uncertainty about development in the Nigerian oil and gas sector that has seen Nigerian daily oil put declined from 2.2 million barrels per day to a meagre 1.2 million barrels per day, refineries from India, Indonesia and the United States are backing away from buying Nigerian oil.
The Niger Delta Avengers, a militant group has staged a number of attacks on oil installations belonging to Shell , ENI and Chevron, pushing output in what is usually Africa’s largest crude exporter down past 20-year lows last month.
India’s state-run Indian Oil Corp. Ltd – a major buyer of Nigerian grades over the past year – has stated in its recent tenders that it would not take grades under force majeure. Qua Iboe remained off the list in its latest tender, according to a document seen by Reuters, an extremely unusual development in its requests for sweet crude.
Indonesia’s Pertamina, another frequent buyer, also chose not to buy Nigerian grades in its recent tenders, favouring Congolese Coco, Angolan Girassol and Saharan Blend from Algeria instead.
Traders said Pertamina had shifted its preferences since the violence and uncertainty escalated, although Daniel Purba, senior vice president of ISC Pertamina, told Reuters by text message that Pertamina is “monitoring” Nigeria, but “currently it’s still not affecting crude purchasing.”
ALSO SEE: Nigeria loses 400,000 barrels per day as Shell suspends Forcadors repairs
Four of Nigeria’s oil grades – including the largest stream, Qua Iboe – have been under force majeure in the past month – a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.
ExxonMobil, which declared force majeure on Qua Iboe in May due to an accident, lifted the declaration last week, but the unpredictability is too much for some buyers.
The reduced demand means Nigeria is not benefiting as much as others from a rebound in Brent crude prices, which is partly driven by its own oil outages.
Even refineries on the U.S. East Coast, which have been on a buying spree for Nigerian crude in recent months that averaged 240,000 barrels per day (bpd) in April and May, according to Reuters shipping data, are starting to turn away.
As a result, differentials to dated Brent for Qua Iboe, Bonny Light and other grades are under downward pressure. There are several unsold cargoes for June loading, even with more than half a million barrels of production missing.
The Nigerian government set up a team this week to launch dialogue with the Avengers, but the group, via their Twitter feed, rejected the offer to talk and blew up another Chevron well.