Nigeria suffers in OPEC, US tussle

Nigeria has continued to suffer in the escalating duel between the United States and the Organisation of Petroleum Exporting Countries (OPEC) oil production. According to a report by Dow Jones news agency, Nigeria has lost business in its main market in the US and struggled to gain footholds elsewhere, raising a question for the oil cartel over whether its decision to fight for market share may have hurt some vulnerable members. OPEC had, last year, abandoned its traditional role of propping up prices through production cuts, figuring that surging American production would depress prices, no matter what it did and opting to fight for market share instead. In the midst of this trouble, Deutsche Bank has said that Nigeria needs oil prices at $87.90 to balance its budget, a level most oil analysts don’t see happening soon.

Stubbornly low prices prompted Nigeria to raise the issue of an emergency OPEC meeting earlier this year, though it didn’t materialise. Few other countries’ oil industries have also been hit as hard as Nigeria, highlighting a challenge for the petroleum cartel ahead of its meeting on Friday.

“Once a highly desired, easy-to-refine product, Nigeria’s oil is now hard to sell. In 2014, it fetched more than $2 a barrel more than the global benchmark, Brent crude, according to OPEC data. “This year, that premium has plunged to 74 cents, on average—the lowest in a decade,” the report said yesterday. Nigerian cargoes that normally sell a month ahead of delivery have languished without buyers. In early May, at least 80 million barrels of Nigerian and Angolan crude were still seeking buyers, according to Barclays.

“Nigeria is in immense pain,” said Amrita Sen, chief oil analyst at Energy Aspects, adding that Nigeria has been the worst affected by these changes. The Nigerian National Petroleum Corporation (NNPC) and the Ministry of Petroleum Resources declined to comment.

Its plight highlights divisions within OPEC as the group’s ministers begin arriving in Vienna this week. Venezuela, Algeria and Angola have also struggled while wealthier OPEC members such as Saudi Arabia and Kuwait ramp up production and lock down buyers in Asia. Nigeria’s situation also raises a red flag about the strength of a recent oil-price recovery. After crashing from $114 a barrel to $45 from July to January, the Brent price has gone up more than 30 per cent since, closing at about $65 on Friday.

“A disconnect between the price of oil-futures’ contracts and the price paid in daily physical transactions was a precursor to the collapse last year, though analysts disagree about whether Nigeria is symbolic of the larger market,” Dow Jones reported. “The Nigerian barrel is really now the swing barrel,” said Eugene Lindell, an oil market analyst at JBC Energy. ” That’s on our radar and when we see West African barrels underperforming, then we’re worried about the global crude market.”