Nigeria, one of two OPEC countries completely shielded from any cuts to its oil production, was in line for a windfall from the group’s agreement late last month to shore up the price of crude, Reuters reports.
Instead, it is struggling to sell its rising oil production as the decision in November by OPEC to trim output led to higher benchmark prices which slammed shut trade routes and did little to stem an excess of light, sweet oil, leaving millions of unsold barrels. Nigeria’s oil is finding itself cut off from buyers; some 30 million barrels of it has yet to sell, with more loadings due within a week and output steadily rising.
One catch is that the spike in dated Brent, the baseline on which Nigerian exports are priced, made U.S. barrels comparatively cheaper and more attractive. This opened a flood of exports from the U.S. to Asian buyers who might otherwise take Nigerian oil, and boxed Nigerian oil out of its outlet at refineries on the U.S. East Coast.
The other issue is that because Nigeria and Libya are some of the only OPEC producers of “light” crude, nearly all of the cuts will come from “sour” crude, which though usually less valuable because of its higher sulphur is now in demand as buyers await a tighter market for it.