Nigerian crude oil differentials were largely unchanged yesterday, after a series of offers from Shell for October-loading cargoes drew no buyers, and even BP, which has been an active bidder this week, showed unwillingness to pay higher prices.
Shell was said to be offering at least 10 cargoes with a variety of Nigerian grades, including the four major ones. Reuters quoted traders as saying Shell was showing offers at between $1.90 and $2.00 a barrel above dated Brent, the highest for any of the grades in the last seven months. They added that given where current bidding interest was, the prices were unlikely to be achieved.BP was heard to be bidding for cargoes of Bonga and Forcado loading in early November at around $1.60 above the dated Brent price, down from bids of about $1.75 on Tuesday.
In the absence of the November loading schedules, few were likely to be in a position to sell cargoes for those dates, the traders noted. The British oil major has bought at least seven cargoes linked to the swaps market in the last couple of weeks, but was believed to have possibly bought more, they added.
However, the continued rise in the price of Liquefied Petroleum Gas (LPG), otherwise called cooking gas, is likely to be for a long time in the face of the challenge foreign exchange, as well as infrastructure and planning, poses to the market. Against this backdrop, more Nigerians might be forced to seek alternative unclean energy sources like firewood and dirty fuels.
This was the position of the Executive Secretary, National Association of Liquefied Petroleum Gas Marketers (NALPGAM), Bassey Essien, and the National Chairman, Liquefied Petroleum Gas Retailers, a branch of Nigerian Union of Petroleum and Natural Gas Workers (NUPENG), Chika Umudu, in separate interviews with The Guardian.
However, the fortunes of crude oil traders may be boosted with the introduction of the InterContinental Exchange (ICE) platform that would be formally operational from September 17.
The facility would facilitate trading in a derivatives’ contract linked to Nigeria’s four largest crude oil grades – Bonny Light, Forcados, Qua Iboe and Bonga.
This comes after the ICE launched its first set of derivatives linked to the West African crude oil market, aimed at an industry that has called for a strengthening of the dated Brent benchmark.
The cash-settled future will be based on a daily assessment by pricing agency S&P Global Platts for a “WAF index” backed by the four grades, each of which would carry a weighting of 25 percent, according to a note on the ICE website, Reuters reported yesterday. The contract will be based on the differentials of the four crudes to the dated Brent benchmark and would represent 1,000 barrels of oil.