Crude Pricing Change Could Make Nigeria’s Cargoes Less Competitive

OPEC’s largest African oil producer, Nigeria, is set to switch to a monthly average Dated Brent assessment when pricing its crude exports, which could ultimately make its cargoes to Europe less competitive than those of exporters sticking to a five-day average price of Brent.

NNPC, the national oil company of Nigeria, plans to start using the monthly average of Dated Brent—the physical crude benchmark – for pricing its cargoes, Bloomberg reported on Tuesday, quoting a company memo it has seen.

So far, Nigeria has used the five-day average settlement of Dated Brent in the five days after loading, as most other exporters, including those in the U.S., are doing. 

The change in the crude pricing mechanism will make it more difficult to compare Nigerian crude loading prices with those of other exporters, traders have told Bloomberg.

The move would also make hedging more challenging for traders and expose the Nigerian crude prices to the potentially wider monthly swings in the oil market in general, the traders added.

A month ago, Nigeria launched a new crude grade, Nembe, in an attempt to undo the damage from long-running thefts and attacks in the country’s Niger Delta region.

The new Nembe grade is expected to add 1.9 million barrels of crude oil exports to Nigeria’s portfolio monthly, according to an NNPC press release, with first cargoes already sold in October for export to Western Europe.  

As a crude grade, Nembe is similar to Nigeria’s low-sulfur, distillate-rich grades, which go for a premium to Brent crude and are suitable for European refiners. According to the NNPC, “the Nembe crude oil grade also has a low sulphur content and low carbon footprint due to flare gas elimination, fitting perfectly into the required spec of major buyers in Europe.”

Nembe crude has previously been produced, though not as a separate grade until now. In previous years, Nembe went through the Nembe Creek Trunk Line along with Nigeria’s Bonny Light grade, but attacks on pipelines in the Niger Delta sidelined production.

By Charles Kennedy for Oilprice.com

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