Page 4 - AfrOil Week 37 2019

AfrOil COMMENTARY AfrOil
Emirates NBD Research
New hope for African light sweet crude?
African producers may have room to breathe if Saudi outages persist, but only if conditions are right
WHAT:
Aerial attacks in Saudi Arabia are set to affect global light sweet crude supplies.
WHY:
Rising US production and exports have crimped the market for African light sweets.
WHAT NEXT:
African production could serve as an alternative to Arab Light and Arab Extra Light – but only if Saudi production outages are not reversed quickly.
HYDRAULIC fracturing has not been kind to oil-producing states in Africa – and not just because the technique has yet to be widely used there. The problem is that fracking has unlocked vast reserves of unconventional hydrocarbons in North America.
As a result, US oil production has soared, the US government has lifted long-standing restric- tions on the export of domestically produced oil and US-based operators have embraced the opportunity to sell their production to foreign buyers. Likewise, European and Asian buyers have been showing strong interest in US oil, most of which consists of light sweet grades.
And this is where the problem starts for Africa. A large share of the oil coming from that continent is also light sweet crude. Nigeria, for example, produces Bonny Light, which usually has a specific gravity of around 34.5 degrees API and a sulphur content of about 0.14%, as well as Qua Iboe (36.3 degrees API, 0.14% sulphur), Okono (41.9 degrees API, 0.06% sulphur), Pen- nington (35 degrees API, 0.08% sulphur) and other grades.
Meanwhile, Cote d’Ivoire’s Lion crude comes in at 39.6 degrees API and 0.18% sulphur, while the Republic of Congo (Brazzaville) offers N’ko- ssa (41 degrees API, 0.14% sulphur) and Kitina (36.4 degrees API, 0.11% sulphur).
Gabon, for its part, has Rabi Light (37.7 degrees API, 0.15% sulphur), while Angola has grades such as Xikomba (34.7 degrees API,
0.39% sulphur) and Nemba (40.9 degrees API, 0.18% sulphur).
Shale shifts
Until recently, many refiners were willing to pay good prices for light sweet African crude, since it was easy to process into gasoline that did not require extensive desulphurisation.
In recent years, though, many long-time buyers of African light sweets have turned to US-produced light tight oil from fields in the Bakken Shale and the Permian Basin. These streams tend to be very light and sweet, meas- uring 45-50 degrees API and containing 0.1% sulphur or less.
As a result, African producers of light sweet crude have been forced to work harder to find paying customers. At the same time, they have also seen the price of their product go down – and not just because of the competition, but also because world oil crude prices have been rela- tively weak.
But now the pricing dynamics have changed. World crude markets have rocketed upward over the last few days, propelled by the Septem- ber 14 aerial attacks on major oil infrastructure facilities in Saudi Arabia.
The Saudi factor
These incidents temporarily reduced Saudi Ara-
bia’s production by about 5.7mn barrels per day
(bpd). 
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w w w . N E W S B A S E . c o m Week 37 17•September•2019