By Adedapo Adesanya
The Nigerian oil industry comes under heightened pressure as one of the country’s crude grades, the Bonny Light, fell to about $12 or $13 per barrel at the real oil market, according to sources monitoring the West African oil market.
According to a report by Bloomberg on Friday, “the deeply loss making level shines a light on a chasm that’s emerged between real crude prices that producers are fetching, and headline futures contracts like Brent, which stood at about $28 on Friday.”
The coronavirus pandemic, which has led governments to the close factories and refineries, has also led to about 65 percent drop in global demand for the commodity.
Although, Nigeria is not only country feeling the effect of this, it is feeling it more with no buyers for over 60 of its cargoes as Europe And Asia, key destinations for Nigeria’s oil are on lockdown and have no need for the commodity.
Particularly worrying for the country is the lack of storage. Nigeria has very little space to store supplies now that are no buyers in an oversupplied environment and with no onshore storage to boast of, its oil has to go on ships and with charges on freights, this is very difficult for the country.
According to market experts, Nigeria will run out of storage spaces faster than expected if it doesn’t find ships to take its oil. Globally it has been said that storage spaces will fill up in a matter of weeks.
Last month, following worries about the oil price war, the Managing Director of the Nigerian National Petroleum Corporation (NNPC) said if prices fell below $22 per barrel that Nigeria would be out of business at such levels.
About 10 million barrels of West African oil for sale in April remain unsold with less than two weeks left in the month. For May there is as much as 60 million barrels. That represents a very slow pace of sales, and the region’s June loading programs are just starting to be released.
The vast majority of unsold supplies also belong to Nigeria rather than her OPEC counterpart, Angola, traders said.
And with demand set to plunge by as much as 9 million barrels per day this year, market analysts have called for bracing up for incoming effect on the oil dependent economy.
The United States has proposed to pay oil producing firms to halt oil production in order to serve as some sort of storage should the coronavirus pandemic continue, suggestions have been made that the country follow suit but with tight revenue, this will be difficult.
