Tradewinds: Nigerian Oil Production Disruptions Hurting Tanker Rates

23 May 2016: “Disruptions to Nigeria’s crude exports are set to have an increasingly negative effect on tanker markets, US ship broker Poten & Partners has predicted.The country’s Qua Iboe crude oil terminal, which exports more than 300,000 barrels per day (b/d),  was closed on Thursday following pipeline damage and threats from Niger Delta militants.Exports of Nigeria’s other large  crude oil grades, like Forcados, Bonny Light and Escravos have also been restricted, primarily due to sabotage and attacks on pipelines. As a result of the outages Nigeria’s oil production has already dropped below 1.5mb/d, according to Poten & Partners. “…Poten & Partners says  VLCCs and suezmaxes, for whom Nigerian exports are an important market, both face  downward pressure on rates from sustained outages for differing reasons. By the middle of 2015, Nigeria had replaced Saudi Arabia as the largest crude oil supplier to India, for example, as more Indian refiners switched out their long-term contracts with Middle Eastern suppliers to spot oil purchases from Africa. ‘Chances are that this short-haul trade would be serviced predominantly by suezmaxes, rather than by VLCCs, which were the preferred vessel for the Nigeria – India movements,’ it added. However, suezmax owners face  their own potential disruptions depending on the need and source for replacement for Nigerian crudes. Poten & Partners says  the US and Europe, historically the main destinations for Nigeria’s crude, has ample stocks and could conceivably decide to draw down inventories. Continued disruptions of Nigerian production also could drive up oil prices and speed up the return of US shale, the broker says,  both of which are ‘rather unattractive scenarios for shipping’. Indian charterers dominated fixing patterns out of Nigeria last year  accounting for 38% of all spot fixtures from the country. The US broker suggests that if Saudi Arabia increases production, or diverts flows, to regain some of the market share they lost in India, the relatively long-haul West Africa to India trade would be replaced by the much shorter Arabian Gulf to India trade.”