NIGERIA – Following the surge in global uncertainty and weak demand for Nigerian crude oil, the Federal Government has slashed the Official Selling Price (OSP) of Nigeria’s crude oil to lure buyers as over 70 percent of April cargoes remain unsold.
According to a Reuters report, the nation lowered its OSP last week before releasing its May loading programmes on Monday.
May loading programmes emerged with key grades seeing a rise over the previous month. Bonny Light and Forcados are both higher and due to load 245,000 barrels per day, Bonga 123,000 bpd and Qua Iboe 215,000 bpd.
There will also be two cargoes each of Usan and Yoho, five cargoes each of Brass River and Agbami, six of Egina and four Amenam.
The Nigerian National Petroleum Corporation (NNPC) cut its April OSP for Bonny Light and Qua Iboe by US$5 per barrel to dated Brent minus US$3.29 and minus US$3.10 per barrel, respectively.
The nation could not find buyers for about 50 cargoes or 70 percent of April loading despite offering buyers discount. Experts have said buyers prefer Saudi Arabia and Iraq that could afford to offer between US$5 to US$8 discounts per barrel.
However, with the nation’s economic position declining amid fast-spreading coronavirus, Nigeria was forced to lower its OSP to a record-low to entice buyers and reduce its unprecedented excess of crude oil.
Nigeria’s foreign reserves declined to 29 months low of US$35.9 billion this month, down from US$45 billion recorded in June 2019 due to the drop in revenue generation caused by low oil prices and the inability to sell the nation’s oil.
All these coupled with weak business sentiment has erased more than 17 percent of the nation’s stock value and compelled the Central Bank of Nigeria to technically devalued the Nigerian Naira from N307/US$1 to N360/US$1 to reflect the changes in macro fundamentals.
The Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, said recently that the country was already struggling to find buyers for its crude oil, saying over 50 cargoes were yet to be sold.
Kyari said Nigeria’s crude cargoes had been stranded due to the higher selling price compared with its fellow OPEC members such as Saudi Arabia and Iraq, which could afford to offer discounts of around US$5 to US$8 per barrel to buyers.
In a related development, a major Nigerian independent oil and gas firm, Seplat Petroleum Development Company Plc, is looking to cut costs by at least 30 per cent to counter a crash in crude prices, its Chief Financial Officer, Roger Brown, has said.
Royal Dutch Shell, a global oil giant with huge presence in Nigeria, said on Monday that it would lower its capital spending for this year to US$20bn or less, compared with its previously planned level of around US$25bn.
The company also said it would reduce its operating costs by US$3bn to US$4bn a year over the next 12 months compared to 2019, as well as achieving material reductions in working capital.