North Sea outages helps set Nigeria on pace to highest oil exports to Europe in seven months
But planned maintenance on Norway’s Ekofisk oilfields this month slashed exports to just one cargo from the usual 10-15. Flotta, another of the 12 North Sea fields, closed for repairs over two weeks in late May.
“Nigerian grades are normally middle-distillate-rich and with Ekofisk having undergone maintenance, Nigeria is meeting European demand for this type of crude,” said Ehsan Ul-Haq, lead analyst for oil research and forecasts at Refinitiv.
Supply of the five North Sea crude grades that underpin the dated Brent benchmark is set to fall to around 720,000 bpd in June, from 948,000 bpd the month before.
The contamination of a pipeline carrying Russian Urals crude in April interrupted flows to central and eastern Europe for a month and left stocks in need of replenishment.
Higher volumes to Europe have provided an unexpected boon, with Nigerian exports to the United States on the wane for a decade due to increased U.S. shale oil production, and demand relatively steady in Nigeria’s key markets India and Indonesia.
“(Europe) always tends to act as the clearing house at lower value than the East,” one trader selling Nigerian crude said.
Though European gasoline margins have been middling and especially poor among southern European refiners, several factors may mesh in coming months to support Nigerian differentials, which stand near multi-year highs.
Traders said the possibility of a permanent shutdown to the fire-stricken Philadelphia Energy Solutions refinery in the city, though it was a consistent importer of Nigerian crude, would increase demand for gasoline refined in Europe.
Egina, heavy sweet crude from a new offshore field, has proved consistently popular among refiners in northwest Europe.
“Exports of the grade primarily go to Europe, specifically the Netherlands and France, which combined took around 155,000 bpd in May, or 83% of the grade’s exports,” said Mercedes McKay, analyst at energy consultancy FGE.
Heavier grades could also benefit, with comparable Venezuelan and Iranian crude pushed off the market by U.S. sanctions and ahead of a January switch to less-polluting marine fuels under new International Maritime Organization standards.
“(Even if) margins are bad, European refiners think they can profit from distillate demand for the 2020 bunker fuel change,” Refinitiv’s Ul-Haq said.