London, UK | – Crude traders are pushing Nigeria’s state oil company to lower the official price at which it sells some cargoes, the latest challenge to Africa’s biggest producer as it grapples with output that’s been restricted by militant attacks this year.
Five companies that market the nation’s crude have raised the issue of high official selling prices, Mele Kyari, general manager of the crude oil marketing division at Nigeria National Petroleum Corp., said by phone Monday. Buyers of Nigerian crude are concerned that uncertainty about supplies from the country are making the nation’s barrels harder to resell, two traders familiar with the West African market said.
“We are aware,” Kyari said. “We have received several communications with our off-takers on this. We are assessing the comments to either validate or disprove it because sometimes you can’t be sure of the validity of these claims.”
Nigeria needs every dollar it can get as it contends with a militant campaign that means annual output is currently on course to be the lowest since 1989, just as a global glut means futures are trading at less than half where they were two years ago. The nation’s oil minister said Monday that certain export restrictions will soon be lifted.
Nigeria sells cargoes at government-set official prices to buyers who are mandated to receive certain amounts of crude. Typically, most of those grades will be supplied within a $2 dollar range above or below key benchmarks that typically track futures markets. If traders can’t resell at the official price, they lose money. Failing to achieve the official price by a single dollar would mean a $1 million loss for a standard cargo.
At the same time, NNPC has to be careful to set the right prices, so that it retains companies in future years to market its exports.
Oil Minister Emmanuel Kachikwu told reporters in New Delhi that he anticipates force majeures on all its key grades to be lifted by December. The measures were implemented when militant attacks caused supply disruption, giving sellers the right not to meet their contractual obligations.
He also said Nigeria is seeking $15 billion in advanced oil payments from India to help the African nation get through current cash flow problems.