Nigerian crude and major oil contracts advanced to a 10-day high as attacks between the US and Iran heightened inflation risk.
Brent jumped nearly 3% to trade above $90 a barrel amid crossfire in the Middle East, where two ships have reportedly come under attack while trying to pass through the Strait of Hormuz.
Nigeria’s light sweet crude grades, particularly Bonny Light, Qua Iboe, and Forcados, remain anchored around $93/barrel. Brent traded in the mid-to-high $80s range as the crude complex stabilized broadly.
Nigerian crude carries a robust physical premium within the Atlantic Basin.
Early on Monday, traffic through Hormuz was nearly zero after several days of increasingly hostile interactions between the United States and Iran. The attacks on vessels are sure to cause more concern about the security of ships using the Strait as they travel near Oman – at times with transponders turned off, referred to as going dark, and, at times, with US military assistance.
One of the only ships to be observed attempting to transit the Strait of Hormuz on Monday was a Marshall Islands-flagged bulk carrier, emerging from the Persian Gulf with its transponder off as it neared the strait. One liquefied petroleum gas (LPG) carrier associated with a dark fleet that shipped Iranian exports seemed to be heading for the Strait.
The United States and Iran carried out an escalating cycle of reprisal attacks, with U.S. Forces launching a fresh volley against Iran after service members were killed. US Central Command said in a statement on Sunday that it had carried out a ninth night in a row of strikes against command sites, maritime infrastructure, and missile and drone sites and infrastructure in Iran.
This was done to “further reduce” Iran’s capability to attack ships sailing through the Strait of Hormuz. The death of a US soldier in northern Iraq the previous Saturday brought the total to 17 since the start of the US-Iran conflict.
- “Iran wants to negotiate but still attacks,” Secretary of State Marco Rubio said in an interview with American journalists on Sunday, while insisting that Tehran continues sending “signals that it is interested in negotiations, and we have the U.S. Military responding to its missile and drone strikes in recent weeks.”
Rubio said that he sees “some evidence that there’s a divide within the regime itself in Tehran,” with more pragmatic figures preferred a deal while hardliners desire conflict.
- “We are taking out Iranian assets that are being used to attack commercial vessels, for instance, when ships move through the Strait of Hormuz,” Rubio said, referring to commercial ships crossing the waterway.
- “As long as Iran insists on controlling an international waterway, we’re going to have to respond to that.” Kuwait was once more the biggest recipient of Iran’s revenge.
Kuwait Petroleum Corporation announced “significant material losses” at an unspecified oil site requiring its evacuation and resulting in several injured people, while two Kuwaiti water and electricity plants have now been struck.
Nigerian crude commands premium amid shipping delays in the Middle East
European refiners are paying a physical premium for Nigerian grades amid increased geopolitical risks and shipping delays associated with the Middle East (and the Strait of Hormuz). This risk is entirely avoided through the direct Atlantic shipping route for Nigerian grades.
According to NUPRC, Nigeria’s Oil output averaged 1.56 million bpd. This represents the highest crude oil output since April 2020.
Total liquids, including condensates, output has averaged 1,735mn bpd following four straight months of growth. Terminal Output: Bonny remains Nigeria’s top-producing terminal (c.318,000 bpd), closely trailed by Forcados (c.306,000 bpd).
Infrastructure Stability is behind this production increase, which appears to be enhanced security that has led to an extended period of pipeline uptime, resulting in previously constrained fields being brought back to production.
The domestic picture has been completely altered by the expansion of Dangote Petroleum Refinery from the demand perspective.
The behemoth importer just lifted around 40.4 million barrels of crude within 60 days alone from Nigerian grades such as Bonny Light, Forcados, and Bonga for its processing needs, and this sizable in-house pull pulls a strong domestic crude floor under Nigerian oil grades – something regulators and producers are wrestling to reconcile with high-value Atlantic grade loadings.
