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Nigeria is sitting on between 20 and 34 million barrels of unsold crude, Nigerian media report, quoting a Platts survey of tenders for July loadings. This goes counter to upbeat forecasts about global demand that were in no small part responsible for the latest oil price rally.
This rally has now been reversed into a slide by a combination of geopolitical developments, notably the U.S.-China trade dispute, and the expectations that OPEC and Russia will soon begin to pump more oil.
Apparently, some traders want to buy crude at even lower prices. As one trader told Platts, “Some refiners could be opportunistic about buying distressed cargoes.” Indeed, Nigeria’s two highest-quality grades, Akpo and Agbami, are currently selling for the lowest prices in seven months because of rising unsold stockpiles.
One reason for the discount, says Platts, is that the spread between Brent and WTI is wide enough to make the latter more attractive than Brent-linked grades, such as the Nigerian ones. OPEC has pledged it will continue to work towards achieving market stability, but some would say that the market is pretty balanced right now, with the overhang that pushed Brent below US$30 two years ago now gone.
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The unsold oil inventory might make Nigeria less cooperative at Friday’s OPEC+ meeting. The West African nation is also the biggest producer on the continent and was initially exempt from the production cuts that OPCE agreed to in November 2016. Last year, however, it was politely asked to cap its output to help inventory cut efforts. Now, it is sitting on millions of unsold barrels, and may even be asked to increase its oil production.
There is a major split between OPEC members on the future of the cooperation deal with Russia. Saudi Arabia and Russia itself are both for a substantial increase in production, but Iran and Iraq are opposed to such a move and Iran has threatened to veto any such decision.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.