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Thursday, 28 March 2019 13:51

PETROL DIESEL SPREAD PROVIDES SUPPORT FOR NIGERIA CRUDE

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The narrowing spread between Northwest European diesel and gasoline cracks had helped support some Nigerian crude grades which have suffered from a lack of European demand, traders said.

The ARA front-month diesel crack was assessed at $14.54/b Monday, with the benchmark ARA front-month EBOB gasoline crack at $9.45/b. The spread between the two was $5.09/b, slightly wider than $4.53/b Friday — the narrowest differential since August 2018.

The recent narrowing of the spread has come on the back of stronger gasoline values, which have led to some Nigerian grades not falling below a certain price threshold. The gasoline strength is boosting demand for the country’s lighter sweeter crudes which are rich in the product.

“The spread between Bonny Light/Bonga and Forcados/Bonga, has been narrowing lately as a result of the recent strength in gasoline,” one crude oil trader said.

The gasoline recovery is due to the seasonal specification change, under which the product used through the summer months of April to September must legally have a lower kPa, which comes at a greater cost, leading to a bullish reaction in gasoline prices.

Furthermore, demand rises during this period, particularly in the US, as consumer buying interest peaks due to the summer driving season.

“Gasoline demand is starting now, I’m seeing demand for lower kPa [summer grade], as people turn their tanks,” a gasoline trader said.

Nigerian barrels had been struggling to find buyers in Europe over the previous two weeks due to weak interest from European refiners who have sought cheaper regional alternatives to West African barrels.

Sellers of Nigerian barrels were initially very reluctant to lower offer levels, but were met with a tough stance from European buyers unwilling to pay a premium for Nigerian crude.

“Nigeria is still quite expensive, although offers have come down significantly,” a second crude trader said.

Mediterranean buyers in particular have such a wide variety of choices that even the recent offer levels for Qua Iboe at Dated plus $1.90/b appeared too high.

“With the comeback of Libya, that was expected to take away market share from someone. Seems like it is Nigeria at this point,” a market source said.

Mediterranean refiners would start seeing value for Qua Iboe at around Dated plus $1.30/b to $1.40/b,” a large Mediterranean refiner said, adding it all depended on the seller’s flexibility.

Source:  S& P Global Platts Platts

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