Page 8 - AfrOil Week 05 2020

AfrOil COMMENTARY AfrOil
 Almost all of China’s biggest crude suppliers are OPEC-plus members, and even before the new coronavirus began to hit oil consumption, the swing producers that make up the OPEC-plus group were in trouble.
e hard-won output deal they reached in December failed to deliver any signi cant cuts to total output levels, and prices have dri ed lower. e deal is currently scheduled to expire at the end of March.
Simply extending the cuts will do nothing to improve the worsening balances between sup- ply and demand, and therefore it will take more to raise oil prices. Deeper cuts will be much harder to agree — Russia, for one, is against them — but that is what is needed to li prices in the face of a Chinese slowdown.
Signs of a slowdown
ere are already signs that a slowdown is hap- pening. Sales of Latin American oil cargoes to
China ground to a halt last week. Persian Gulf producers are starting to receive preliminary nominations from their customers of how much oil they want in March, and that will indi- cate whether Chinese re ners seek to reduce the volumes they li from export terminals in the region.
Non-OPEC producing countries — led by the US, Norway, Brazil and new producer Guyana — were already expected to add two extra barrels for every additional one consumed worldwide this year, squeezing OPEC. e loss of much of China’s oil demand growth will a ect the producer group under the weight of falling oil prices, unless, collectively, they cut their output further.
Noting the unpredictability relating to the spread of the virus and recent uctuations in the oil price, the short term would appear to suggest considerable uncertainty and move- ment in both policy and price. ™
PIPELINES & TRANSPORT
Shell lifts force majeure
on Bonny Light crude shipments
NIGERIA
SHELL Petroleum Development Co. (SPDC), a Nigeria-based a liate of Royal Dutch Shell (UK-Netherlands), has li ed force majeure on shipments of Bonny Light crude.
A spokesman for the company told the New Telegraph on January 31 that oil was once again owing through the Nembe Creek Trunk Line (NCTL), one of the main export routes for Bonny Light. He con rmed that deliveries had resumed several days earlier.
SPDC had declared force majeure on Janu- ary 20, a er Aiteo, the operator of NCTL, shut the pipeline down. It explained the decision by citing its dependence on this transportation route and noted that vandals had damaged the pipe and compromised its operation.
e Shell a liate did not reveal any further details about the suspension of crude ows.
Bonny Light is one of Nigeria’s main export grades of crude. It is a light sweet oil that yields relatively large amounts of gasoline, and the temporary reduction in deliveries had an adverse impact on prices.
NCTL, which follows a 97-km path through the Niger River Delta, typically carries 150,000- 200,000 barrels per day (bpd) of crude oil to a terminal facility on Bonny Island. It is frequently targeted by vandals and thieves and was taken o ine several times last year.
Victor Okonkwo, the managing director of Aiteo, said last December that his company had identi ed and reported a number of the
individuals it had observed attempting to sab- otage or steal crude from the pipeline. So far, he commented, Nigerian security agencies have not detained any of these people.
He was speaking as Aiteo reported that its pipeline had remained o ine for a total of 61 days in the rst 11 months of 2019. About 4mn barrels of crude were lost during these shut- downs, the Nigerian company said.
Losses are common even at times when the pipeline is functioning normally, Okonkwo said.“Alsoworryingistheamountofcrudeloss recorded even when the pipeline is operational, usually in the range of 25-35%,” he remarked. ™
Aiteo says NCTL was off line for 61 days in 2019 (Photo: TheSheet.ng)
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w w w. N E W S B A S E . c o m Week 05 05•February•2020