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NIGERIAN & GLOBAL NEWS ANALYSIS

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Crude oil revenuesNigeria and other African economies are projected to record substantial revenue losses, particularly from the oil and gas sector, as the devastating effects of the Coronavirus pandemic continues its devastating toll on the various economies.

Giving the projection in a statement on the risks of the pandemic to the continent’s economies, Africa Energy Chamber, quoted the Atlantic Council, an American Atlanticist think tank in the field of international affairs, as noting that the immediate effect of COVID-19 for the sector has been on the demand for crude oil, and on its prices.

According to the chamber, most analysts and operators now agree that 2020 could see a negative demand growth for oil globally as industries shut down and countries around the world go on lock down with the attendant effect of oil prices reaching their lowest levels since 1991.

It clarified: “For Africa, this means an immediate pressure on state budgets and macro-economic stability. Apart from South Africa, the continent’s biggest economies rely heavily on oil revenue to fuel state budget and public spending and ensure macro-economic stability.

“All sub-Saharan Africa’s producers had budgeted 2020 with an oil benchmark well above $50, from $51 in Equatorial Guinea all the way up to $57 in Nigeria. With predictions that oil prices won’t go anywhere above $30 for the rest of the year, most budgets need to be re-adjusted and public spending needs to be drastically cut”, the chamber added.

On the pandemic’s direct impact on Nigeria’s revenue potential, the Atlantic Council specifically predicted that COVID-19 would cause the country to suffer the biggest lost in the continent with $15.4bn, representing about 4% of the nation’s GDP.

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bullishA large overhang of April-loading west African crude was depleting slowly on Wednesday owing to some Chinese spot purchases but refiners continued to eschew light grades with high gasoline and jet fuel yields.

Nigerian firms were offering cargoes at official selling price levels while majors and large traders showed higher prices.
*”The only place you can put this stuff is South Africa’s Saldanha Bay but that must be near full,” one trader said.
* Some cargoes were sold this week to a major Chinese refiner but the volume was limited owing to the constantly changing price environment.
* Sales to India could encounter problems beyond run cuts as some ports declare force majeure.
* From Canada and the Caribbean to the Baltic and Singapore, oil tanks around the world are filling fast, despite a 50%-100% jump in lease costs, as oil companies and traders scramble to park unwanted crude and refined products.

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Crudeoil pipelineThe nation’s ailing refineries lost a total of N376.56bn in the last three years, data obtained from the Nigerian National Petroleum Corporation showed. The trading deficit (loss) recorded by the refineries rose by 12.43 per cent to N148.97bn in 2019, compared to 2018.
The refineries posted a loss of N132.50bn in 2018, up from N95.09bn in 2017, according to the NNPC data.

Nigeria, Africa’s top oil producer, relies largely on importation for refined petroleum products as its refineries have remained in a state of disrepair for many years despite several reported repairs. The refineries, which are located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day but

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Nigeria cargo vesselA steep cut in Nigeria’s official selling (OSP) prices has so far failed to reignite spot trade, traders said on Tuesday, with close to 30 April loading cargoes still lingering. The OSP is the price differential to dated Brent, the global benchmark for sweet light crude. Historically most Nigerian grades have traded at a premium to brent as they have been coveted by Refiners due to their low cost of refining and high yields of transport fuels.

Nigeria’s May loading emerged last week, adding to the hefty amount of oil that will struggle to find a home. Demand for light and medium sweet Nigerian grades has plummeted as they yield high levels of jet fuel and gasoline – two of the refined products most hit by the global pandemic slowdown.

Chinese demand has been recovering but elsewhere demand is falling further. Taiwan’s CPC decided to increase run cuts in April. India, another major buyer, is starting to reduce refinery operations due to lockdowns in much of the country aimed at halting the spread of coronavirus, industry and company officials said.

Whilst slashing the OSP make the crude less expensive, in absolute terms the discounts at which the Saudis are pricing their oil into markets is so steep that it effectively locks Nigerian grades out of the market

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