Nigerian differentials lose 50% as high US stocks start to bite

Nigerian differentials lose 50% as high US stocks start to bite

London (Platts)--9Jun2006

The slowdown in US crude oil buying and overhang in Nigerian crude from
the June program have put a substantial pressure on Nigerian crude prices.
Differentials lost 70 cents per barrel in four weeks to reach Dated Brent plus
$0.65/barrel Friday morning with signs that levels may be under further
pressure. The next support level is expected to be close to around Dated Brent
plus $0.50/barrel following deals heard done Thursday.
The Indian Oil Corporation (IOC) was heard taking only one VLCC of
Nigerian crude in its tender that expired Thursday. IOC took Escravos VLCC at
around Dated Brent plus $0.15/barrel, trading sources said. The award
is considered to be bearish for light sweet grades and adds to the gloom in
the market.
Arcadia was heard selling Qua Iboe June 30-July 01 at plus Dated Brent
$0.52/barrel to Sun. The number is low but the cargo is considered fairly
prompt. Moreover, China's Unipec was heard selling Qua Iboe cargo July 15-16
to Shell at around Dated Brent plus $0.50/barrel. However, some sources
believe that the cargo was a swap for a Bonny Light cargo and that the price
is not reflective of the market level.
Nigerian June cargoes struggled to find buyers as the US market, the main
destination for sweet Nigerian grades, has record crude inventory levels which
reached about 350 million barrels this week, a five-year high. "There are
about 15 cargoes loading in June on the water or will be heading later to the
US Gulf Coast," a trader said. The lack of demand and storage capacity in the
US is likely to lead to logistical bottlenecks. "The barrels will have to stay
on the ships they are on until storage is made available, this may cause
shortage of vessels" a trader said.
Nigerian grades were not the only West African crude under pressure.
Angola's Cabinda, Hungo and Nemba have all lost values dramatically in the
last couple of days. "Cabinda is losing value because its price is directly
linked with fuel oil which have been going down while Hungo is affected by the
weakness in Urals," a trader said. Unipec bought Hungo cargo from BP loading
July 26-27 at Dated Brent minus $5.50/barrel. A source close to the deal told
Platts that the Chinese did not "need the cargo but found the price
attractive."
So far China, the main buyer of medium heavy West African grades bought a
total of 13 VLCCs for July-lifting, four more than it purchased for its June
program, market sources said. On the other hand, traders were disappointed
with the results of Taiwan's Chinese Petroleum Corporation (CPC) tender
results this week who took two VLCCs only of Nemba, Cabinda and Zafiro
which did little to support medium heavy grades.

For similar stories, take a trial to Platts Oilgram News at
http://www.platts.com/Request%20More%20Information/

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.