Asia is set to import record volumes of oil from West Africa, mainly from Nigeria, this year as increasing supplies of high quality crude drive down its export prices and some buyers shun their traditional supplier, Iran.
Available data showed that in the first quarter of 2012 Asian countries imported 1.82 million barrels per day of crude from the West Africa region mainly from Nigeria this is against the 1.79 million barrels per day in the first quarter of 2011. In 2010 first quarter import of crude from the region was 1.71 million barrel per day as against the 1 million barrel per day in 2009 and 1.21 million barrel per day in 2008.
In the second quarter of this year crude export from West Africa to Asian declined to 1.76 million barrel per day but was higher than the 1.57 million per day in the second quarter of 2011 and lower than the 1.73 million barrel per day in 2010.
Two months into the third quarter of 2012, import of crude by Asian countries stand at 1.64 million barrel per day. According to a survey conducted by Reuters, in June China imported 1,013 barrels per day, in July 889 barrels per day, August 857 barrels per day and in September order has been placed for 823 barrel per day. India ranked the second largest Asian importers of crude from West Africa. In June 2012 it imported 380 barrels per day, 368 BPD in July, 644BPD in August and 475 BPD in September.
According to a Reuters survey of trade and shipping sources end-consumers in China, India, Indonesia and other Asian countries have bought around 1.74 million barrels per day (bpd) of West African mainly Nigeria crude for loading in the first nine months of this year, up around 8 per cent from the same period in 2011.
“This year is going to see another record,” said a senior crude oil trader at a large European refiner. Strong economic growth in China and other industrial economies across Asia is driving a rapid increase in demand for crude oil. Nigeria crude oil is typically “sweet”, containing low levels of corrosive sulphur compounds, and much of it is also relatively heavy, meeting Asian demand for heavy industrial fuel oil and distillates such as kerosene.
Africa’s two biggest oil producers, Nigeria and Angola, have been well placed to meet this extra consumption and exports from the West African region to Asia have risen by more than 50 per cent over the last five years. In the last year, this trend has been accelerated by a big jump in U.S. output of light, high quality crudes. This new domestic production has supplanted oil that used to be imported from Nigeria and also forced down global spot prices of some grades of West African crude oil.
At the same time, many oil refiners that used to take Iranian oil have been scared off by the U.S. and European Union campaign against the Islamic Republic and have instead taken attractively priced oil from Africa.
“The United States will import much less crude oil from Africa this year and Asia is taking many of those barrels,” said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt. “Asian buyers are also replacing Iranian oil with West African barrels because, with all the political problems and the extra insurance costs associated with Iranian oil, it is much easier for them to look elsewhere.”
Asian buyers, who usually negotiate their spot and term import contracts at least a month before loading, have committed to take an average of around 1.64 million bpd of West African crude in the third quarter of this year, up from around 1.46 million bpd in the third quarter of 2011. August has been a particularly strong month for imports into Asia, traders say, with 60 cargoes carrying around 1.84 million bpd heading east. China, the world’s top energy consumer, has taken around 28 cargoes, while Indian refiners have bought 21 cargoes, traders say.
September looks like a slower month for imports into Asia, traders say, with price pressures taking their toll on volumes. West African crude oil is priced against North Sea Brent crude BFO- , which has been strong relative to Dubai crude DUB-, eroding some of the price advantages enjoyed by Nigerian, Angolan and other West African grades.
The front-month Brent/Dubai Exchange of Futures for Swaps (EFS)
DUB-EFS-1M, a market reflecting relative costs for Asian buyers, is near its highest for eight months. “The EFS has widened a lot and that has affected Asian imports for September loading,” said a trader with a large Asian oil company. But the flow of crude oil to Asia from West Africa is likely to pick up again going into the fourth quarter as Chinese refiners start to restock again, traders say, ensuring total volumes in 2012 exceed previous years.
