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Nigeria is cutting the price of its crude oil products by at least $1 a barrel its official selling prices, Bloomberg reported on Thursday, adding that it affects 20 out of 26 oil grades monitored.
Mele Kyari, NNPC group general manager for the oil-marketing division said the move is geared at regaining share of the global oil market as there is a “huge cargo overhang”.
“It is a bearish signal for the light, sweet market,” Eshan Ul-Haq, principal consultant at KBC Process Technology Ltd., said in an e-mail, referencing the types of crude Nigeria mostly pumps. “In order to capture a higher share of the market, OSPs have to come down.”
NNPC cut the selling price of Qua Iboe to a 17 cent premium to the benchmark Dated Brent, according to the price list, from $1.07. It reduced the price of Bonny Light to a 7 cent premium and Forcados to a 41 cent discount to Dated Brent.
Five companies that market the nation’s crude have raised the issue of high official selling prices, Kyari said earlier this week. He said Thursday that the pricing decisions were unrelated to those “complaints.”
The reductions take place as the Organization of Petroleum Exporting Countries — of which Nigeria is a member — attempts to cut its combined output to 32.5 million to 33 million barrels a day in an effort to steady oil markets. Nigeria has said it will be exempt from any production cuts, though final details of such an agreement have yet to be worked out.
Because an OPEC output cut would primarily affect medium and heavy crude grades, lower prices from Nigeria are likely to reduce the price differential between light and heavier oil, according to Ul-Haq.
Source: Bloomberg