Nigerian oil futures outperform brent crude amid global unrest

Nigeria’s Brass River and Qua Iboe oil futures have outperformed Brent crude, the world’s benchmark, and are now trading at a $4 premium per barrel amidst rising geopolitical unrest and economic uncertainty worldwide.

Monday saw a two percent increase in the price of sweet medium light crude (Brass River) to $81.02 per barrel and a 1.59 percent increase in the price of light sweet crude grade (Qua Iboe) to $81.12 per barrel.

Through the Qua Iboe terminal, ExxonMobil exports Qua Iboe, which is produced from multiple offshore resources. Refiners frequently choose this particular crude because of its excellent grade and low sulfur level.

After trading at $1.72, or 2.2 percent, at $77.34 per barrel by 6 p.m. Nigerian time on Monday, Nigerian oil futures were $4 higher than Brent.

Nigerian crude is highly sought after due to its low sulfur content, and this pricing advantage highlights the sustained demand for the country’s lighter, sweeter crude. Refiners have great need for it due to its effortless ability to be refined into high-end products such as gasoline and diesel.

“Nigerian oil is one of the most sought-after in the global crude oil industry due to its unique quality. The low sulfur content makes it one of the finest worldwide,” noted Masters Energy Oil and Gas Limited.

According to data compiled by BusinessDay, crude oil prices began to decline at the beginning of the week in response to the most recent economic news out of China, which was seen as negative for the demand for oil.

“China faces persistent deflationary pressure due to weak domestic demand. The change of fiscal policy stance as indicated by the press conference yesterday (Saturday) would help to deal with such problems,” Zhiwei Zhang, chief economist of Hong Kong-based Pinpoint Asset Management told Reuters.

The majority of the 2024 drop was caused by China, the largest importer of crude oil in the world, as OPEC reduced its growth estimate for the nation to 580,000 barrels per day (bpd) from 650,000 bpd.

The Chinese government’s announcement on Saturday that it will be boosting economic stimulus should have helped oil prices.

Beijing did not, however, provide specifics of the magnitude of the stimulus package, which would take the shape of low-income household subsidies and “significantly increased” debt purchases from local governments.

It seems that the only information traders were interested in learning from that update was the precise amount the Chinese government planned to spend on these extra stimulus programs.

Consequently, oil traders momentarily set aside their concerns about the Middle East and refocused their attention on the world’s largest oil importer, believing that any stimulus it provided would not be sufficient to support the world’s stock and commodity markets.

Nigeria’s economy, which is mostly dependent on oil exports, may be significantly impacted by this move in the oil markets.

“A decline in demand could translate to lower oil prices and consequently reduce government’s revenue. This could put pressure on the country’s budget and potentially lead to cuts in public services and infrastructure spending,” said Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies.

Beyond $78 per barrel, oil is benchmarked in the 2024 budget. Additionally, it assumes that Nigeria will produce 1.78 million barrels per day (bpd) or more.