Oil: Threading with caution as U.S turns to Nigerian crude again

THE statement by the outgoing Ambassador of the United States of America (USA) to Nigeria, James Entwistle at an event in Abuja to mark the 240th Anniversary of his country’s Independence, that there was no hidden agenda behind his country’s decision 2014 to stop crude oil purchase from Nigeria could best be described as a pronouncement by a loyal diplomat.

On the question of whether the US deliberately stopped crude oil imports from Nigeria to undo the government of the immediate past president, Goodluck Jonathan, the American envoy in protest said, ““I take great offence to your question. There is no conspiracy for the U.S. not to buy oil from Nigeria, as the price of oil was determined by the international market and that the desire of every business person was to get the best product at the best price.”

“That sometimes happens to us with our oil! But I wish you listen to my last statement where I talked about the importance of the private sector and the commitment of the US companies to help build this country (Nigeria).”

Recall that The U.S. had in July 2014 stopped the importation of crude oil from Nigeria. And before now, there have been muted concerns about whether the decision to completely end oil importation from Nigeria had any political connotation Nigeria did not export a single barrel of crude to US-based refiners in July 2014 for the first time since records started in 1973. Preliminary data suggest the trend continued in August and September. However, at its peak in February 2006, the US imported 1.3million barrels per day from Nigeria. By 2012, Nigeria was already selling just 500, 000 barrels per day, but was still one of the top-5 suppliers to the US, alongside Saudi Arabia, Canada, Mexico and Venezuela.

Though the US has the freewill to embark on any policy that best suits its interest as the country has always done, the curious question is: how do you explain that Nigeria was singled out while imports from three other countries including two OPEC members- Kuwait and Saudi Arabia, were massively increased?

At best, the US envoy dodged to address the issue of the continued importation from other oil-producing nations, including OPEC members like Saudi Arabia and Kuwait and non-OPEC suppliers like Canada. In fact, it is on record that, while US completely halted oil imports from Nigeria, it increased its importation from those three countries.

ALSO SEE: Oil output hits record high as Nigeria, Iran boost supplies

At the wake of the US zero-oil-import policy against Nigeria, several analysts both local and foreign had insinuated that it was not unlikely that oil imports termination with Nigeria and the refusal of the US government to sell weapons to Nigeria to fight Boko Haram might both be political signals from President Barack Obama to the then Nigerian presidency as it can be seen as demonstration of a lack of commitment by the US government to a supposed strategic partner in Africa (Nigeria). This is the core issue which the US government official in attempt to defend his country, did not address in his Abuja comment.

At some point, Nigeria was one of the top five oil suppliers to the United States (US), supplying it with 1.3 million barrels of oil every day. This plummeted through an average 73,000 barrels per day (b/d) in the first seven months of 2014 to zero thereafter.

As rightly remarked in a Deutsche Bank analysis report, “the decline in US imports from Nigeria, proceeded much faster than for the US’ other major suppliers.” And it is the rather drastic and zero oil imports from Nigeria that suggested a possible political connotation.

Curiously, hope has risen for Nigeria’s crude oil business as the United States (US) has turned again to Nigerian crude to augment shortfalls orchestrated by slowdown in the country’s shale oil production.

Minister of State for Petroleum, Ibe Kachikwu, recently alluded to the U.S. resumption of oil imports from Nigeria, though he did not reveal the details of the development but said the U.S. had indicated its interest in buying “very limited” quantities of Nigeria’s crude.

Advertisement

However, according a report by Bloomberg, US oil production has fallen by about 600, 000 barrels per day since peaking in 2015, and imports have filled the gap as the American industry is hoarding foreign crude. With this development, the US is now a big importer of crude oil again after a very sharp fall in its production.

ALSO SEE: NNPC records N19.43 billion loss in April as oil production drops

US daily crude imports averaged 7.9 million barrels per day over the last 13 weeks, 9.8 per cent higher than the year before. “That’s not a one-week blip,” Tim Evans, an energy analyst at Citi Futures, told Bloomberg. “We’re seeing a consistent pattern.”

Faster imports were driven by a surge in oil deliveries from Saudi Arabia, Venezuela and Nigeria which cleared US customs over the seven day period.

According to the Bloomberg report, refineries along the US coasts are choosing to buy imports instead of local crude. “One of the biggest winners is Nigeria, which is regaining lost market share. Imports from Nigeria surged to 559,000 barrels a day in mid-March, compared with an average of 52,000 for all of 2015. The opening up of the US market is giving Nigeria a new beginning with the US in oil trade.

But with the US now buying an average of 600,000 barrel per day, Nigeria can now have a respite but my advice is that we should now begin to count less on America for the sale of our crude oil. Let us begin to look elsewhere and the faster we do this, the better for us.