Margins for gasoline against crude have hit 10-year highs in recent weeks, yet official prices for gasoline-rich Nigerian exports loading in July are at their lowest compared with the North Sea Dated benchmark over the same period.
The focus on the spot markets for west African crudes has intensified. Questions of quality and competitiveness — and the need to be able to accurately judge arbitrage economics to Europe, South America, Asia-Pacific and the US — have increased the need for price transparency.
Newly released August official Nigerian crude formula prices show modest gains against North Sea Dated, but they remain low relative to the marker, as price is the last remaining weapon in the arsenal of suppliers into an oversupplied crude market.
Angola’s state-owned Sonangol, itself a key supplier to China, noted last week that its priority is maintaining market share in the large Asia-Pacific markets.
Strong refining margins and a discounted North Sea Dated price relative to Mideast Gulf benchmark Dubai have encouraged Asian buyers to move away from Gulf supply and choose spot-traded west African grades. West African exporters will be keen to cement those relationships ahead of the return of greater amounts of Iranian crude to the market in the months and years ahead, following Tehran’s nuclear agreement with the P5+1 countries.
Nigerian grades rich in gasoline have seen their spot market values surge relative to North Sea Dated in the past couple of weeks, despite the lower official formulas. Headline grade Qua Iboe was assessed by Argus at $1.40/bl over the North Sea benchmark on 17 July, compared with an official premium for August liftings of just 61¢/bl. Grades less blessed with gasoline, such as Usan, a gasoil-rich Nigerian stream in production since 2012, have been less well supported. The grade was valued at $1.75/bl below North Sea Dated, and is maintaining a narrow discount to Equatorial Guinean Zafiro crude, with which it is often compared.
Elsewhere in the region, Ghana’s Jubilee crude stream is approaching its fifth anniversary and jostling among the many grades from the Gulf of Guinea to find a home in Europe, Asia-Pacific and the US. But Jubilee crude production is constrained at around 65,000 b/d, well down from the 120,000 b/d design capacity of its FPSO (floating production, storage and offloading) vessel, because of a gas compression fault. Operator London-listed Tullow Oil expects to resume gas exports and reinstate full oil production by mid-August. But the gas shutdown means it will struggle to achieve its production target for this year of 103,000 b/d.
Argus publishes market reports such as Argus Crude and Argus West Africa Oil that include prices of west African crude. Argus Crude has added daily price assessments this month for Jubilee and Usan. Some grades — such as Nigerian Akpo, Angolan Plutonio and Djeno from Congo (Brazzaville) — trade in less liquid markets, but their prices can be calculated daily on the basis of relative product yield, as published in the daily Argus West Africa Oil.
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