Nigeria and Angola, both situated in West Africa, are the two biggest producers in the region, but the crudes from these two countries have treaded divergent paths in the past year, despite a lot of similarities.
Nigeria produces just over 2 million barrels of per day of crude oil that is largely light and sweet. This crude is largely low in sulfur and yields a generous amount of diesel, jet fuel and gasoline, which are the profit-making products for global refineries.
Angola, on the other hand, produces almost 1.7 million b/d of heavy but sweet crude oil — oil that is low in sulfur, but, when refined, yields a lot of fuel oil and residual fuels.
Angolan crude, however, has been finding it easier to attract buying interest than the light sweet and better quality Nigerian crude in the past year, which, until a few years ago, was the preferred choice for most refiners. But it is not only due to higher prices and economics that Nigerian crudes are struggling; a lot has to do with the customer base of both countries.
“Angolan crudes rely on countries that are growing at a rate of growth of 5% to 8% while [crudes out of] Nigeria rely heavily on Europe, where economies are generally on a decline,” said one oil trader I spoke to last week.
And I found this as a very simple yet effective explanation for why crudes from Angola, despite the lower quality compared to Nigeria, are selling swiftly. A fair share of Nigerian export crude cargoes every month are grappling to attract end user and refinery demand, and are instead being stored on ships and on storage terminals, idling away. The bulk of the oversupply in the Atlantic Basin crude market is comprised of Nigerian crudes. A lot of Nigerian crude is floating on the seas and in storage tanks with no home and no destination.
Platts.com
