West Africa: India’s Slowing Purchases Put West Africa Oil Exports At Risk

West Africa: India’s Slowing Purchases Put West Africa Oil Exports At Risk

West African crude sellers have been dealt a big blow by its key buyer, India slowing down its purchases as the COVID-19 pandemic continues to ravage the world’s third-largest oil consumer.

India’s state-owned refiners typically issue tenders for a large proportion of their crude requirements, but with the latest wave of the pandemic in the country still raging, no new tenders have been issued since late April, according to trading sources.

Refiners such as Indian Oil Corporation (IOC), Hindustan Petroleum Corp. Limited and Bharat Petroleum Corp. Limited usually buy significant amounts of Middle Eastern and West African crudes through regular tenders.

A report by Hellenic Shipping recently indicated that the last such buy tender was awarded by HPCL on April 23 for crude loading from West Africa in early June, according to S&P Global Platts data.

IOC last bought crude loading mid-to-late June in a tender that closed April 15 and the refiner has since cut run rates across its refineries to an average of 88 per cent, cutting rates across its nine refineries to 96 per cent-98 per cent in the first half of April.

Indian refineries typically consume a diet of sweet and sour crudes, and the country is the single-largest buyer of Nigerian crude.

Over the past few months, most of the sweet crude requirements have come from Nigeria, where oversupply has forced sellers to offer their oil at relatively economical prices.

“Three weeks without IOC weighs dramatically on Nigeria. IOC is the biggest Nigerian grades buyer. IOC skipped the last June loading window and now seem to have skipped July 1-10 also,” said a second trader.

However, sellers of Nigerian crudes are now said to be seeking other buyers in Asia and Europe as India’s COVID-19 situation remains shrouded in uncertainty amid stringent regional lockdowns and sagging domestic consumption.

Length in the European market as a result of continuous flows of competitively priced WTI Midland from the US could limit the upside for Nigerian demand in the region.

“I think any rise in demand and hence value coming from Europe for Nigerian crude is going to be limited and remain so until the whole market is better balanced. We still have far too much competing light sweet crude available in Europe,” one trader said.

In Asia, Indonesia’s Pertamina, Thailand’s PTT and Taiwan’s CPC are common buyers, but Thailand could take more West African crude on the back of high official selling prices issued by Middle East producers and delayed refinery turnarounds due to the ongoing pandemic in the country, sources said.

The opportunity for low-cost Nigerian crude is likely to seem attractive to refiners in Thailand who also need their share of sweet crude for refinery processing.

That demand could help clear unsold June-loading cargoes, with traders estimating around 25-28 Nigerian cargoes unsold in the month as the July trading cycle looms.

S&P Global Platts Analytics expects India’s oil demand woes to worsen in May but forecasts a slight recovery in the second half of the year, with the country’s oil demand in April already down 300,000 b/d and another likely 365,000 b/d decline expected in May.

Source: This Day



Connect with on Facebook