The harder India, one of Nigeria’s top oil buyers battles with rising COVID-19 infections, the more financial troubles it means for Africa’s biggest economy.
India is a major buyer of Nigeria’s Agbami, Akpo, Bonny Light, and Forcados crude grades, however, demand has slowed in recent weeks, thanks to a spike in coronavirus infections as the country records 26 million confirmed cases and more than 291,000 deaths, according to data from John Hopkins.
Traders told S&P Global Platts that there are about five shipments of Nigeria Bonny crude grade destined for India deferred into June (with 2 of them already delayed from April).
“Despite the deals Nigeria has with India, the Indian refineries are simply not buying now because of COVID,” trading sources said.
Refiners in India, the world’s third- largest crude oil importer, such as Indian Oil Corporation ( IOC), Hindustan Petroleum Corp Ltd ( HPCL), and Bharat Petroleum Corp Ltd usually buy a significant amount of Middle Eastern and West African crudes through regular tenders.
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According to trading sources, no new tenders have been issued since late April 2021.
Data from S& P Global Platts showed the last buy tender was awarded by HPCL on April 23 for crude loading from West Africa in early June.
“Three weeks without [Indian Oil Corp.] weighs dramatically on Nigeria. IOC is the biggest Nigerian grades buyer,” a trader said.
S&P Global Platts Analytics expects India’s oil demand woes to worsen in May but forecasts a slight recovery in the second half of the year.
“In essence, we expect India’s oil demand for May/June to drop to slightly below the level of July/ August last year. Demand in H2 will be 650,000 b/ d higher than H1, driven by a pickup in economic activity amid widening vaccination rollout,” it said in a recent note.
However, Platts Analytics expects Indian oil demand to grow by 350,000 bpd in 2021, but still below 2019 levels.
Nigeria relies heavily on India’s patronage to meet its crude oil sales targets as the government aims to maximize its oil revenue to finance its N13.588 trillion 2021 budget.
Data from the Nigerian Bureau of Statistics (NBS) showed India is Nigeria’s top export destination accounting for 17.12 percent of exports in q4 2020. Crude oil also accounts for 79 percent of Nigeria’s export in the quarter.
In 2021, India has been hit hard by the coronavirus pandemic. The country’s health care system is overwhelmed, its crematoriums are running at full capacity, and just 3percent of citizens are fully vaccinated against the coronavirus.
In response to the problem, Nigeria is considering the possibility that demand can come from Indonesia, Taiwan or Thailand.
According to a report from Hellenic shipping news, there is an opportunity for low- cost Nigerian crude that is likely to seem attractive to refiners in Thailand who also need their share of sweet crude for refinery processing.
That demand could help clear unsold June-loading cargoes, with traders estimating around 25-28 Nigerian cargoes unsold in the month as the July trading cycle looms.
