NNPC Makes Changes to Crude Cargoes Pricing

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By Adedapo Adesanya

The Nigerian National Petroleum Company (NNPC) Limited will alter how its crude cargoes are priced from January 2024.

According to a new circular, the state oil company will start pricing its supplies against the monthly average of Dated Brent, the physical crude benchmark, raising worries that the nation’s barrels may become more risky.

Prior to this latest move, Nigeria prices its crude cargoes based on Dated Brent’s average settlement in the five days after loading.

NNPC plans to stick with the initial nominated loading dates for pricing purposes, according to the circular.

Bloomberg reported that traders said the switch will make the cargoes more prone to the kind of volatility that affects wider oil markets.

The new approach may require increased use of hedging because of the less precise timeframe that will be applied to cargo pricing.

According to the traders, knowing when to hedge can also be challenging, since loadings are sometimes deferred from late in the month to early the following month.

The traders said it will be more difficult to compare the price of NNPC’s shipments to Europe with cargoes from the Mediterranean and North Sea, as well as West Texas Intermediate (WTI) Midland — most of which are priced using the five-day system.

The traders said the latest move by the NNPC may make the nation’s barrels less competitive.

The new pricing measure could be part of efforts to boost earnings from crude, which accounts for more than 80 per cent of the country’s foreign exchange earnings at a time when the nation will be looking to fund its N27.5 trillion budget for the 2024 fiscal year.

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