The shale boom, which has reduced United States (US) dependence on overseas crude, is still creating a rippling effect in Nigeria as price of Bonny Light crude, the country’s flagship grade, has been cut to the lowest in a decade.
Nigeria will sell July supplies of its Bonny Light crude at 23 cents more than Dated Brent, according to data from Nigerian National Petroleum Corporation (NNPC). That is the smallest differential since 2005 and compares with a 50 cents premium in June and $2.55 in 2014.
Surging output from US shale formations contributed to a market glut that drove crude down almost 50 per cent last year, roiling global markets as producer nations lost revenue and foreign exchange reserves.
While oil has pared losses this year, prices are still below what some producers including Nigeria and other OPEC members need to balance their budgets, data from the International Monetary Fund and ING Bank NV show.
“Nigeria has no choice but to cut their price differential to fight for market share,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc, said.
She continued that, “The US was its key oil buyer in the past but imports have been shrinking with more shale output in an already oversupplied market.” The slump in prices last year forced authorities in Nigeria, which relies on oil for about 70 per cent of its income, to scale back budgeted spending and devalue the naira currency.
Ngozi Okonjo-Iweala, former finance minister, had earlier predicted that her successor would face a “difficult” year because of plunging crude revenues.
Brent fell 69 cents to $63.57 on Friday on the London-based ICE Futures Europe exchange. Horizontal drilling and hydraulic fracturing, or fracking, that unlocked supplies in shale formations in North Dakota, Texas and other states has boosted US output to the highest in more than three decades.
That forced overseas producers, whose exports to the world’s biggest oil consumer are shrinking, to find new markets for their crude.
The US has bought an average 30,000 barrels per day crude this year, data from the Energy Department revealed. It shipped almost one million bpd in 2010, according to the data.
As sales to the US slip, Nigeria is vying with OPEC members including Saudi Arabia and Kuwait for customers in Asia, which the Paris-based International Energy Agency (IEA) predicts will account for about a quarter of global oil demand this year.
OPEC’s 12 nations pumped more than their self-imposed limit of 30 million bpd for the past 12 months, as they seek to defend market share.
Saudi Arabia, the group’s biggest producer, has 1.5 million to two million bpd of spare output capacity and is ready to increase production if demand rises, Ali al-Naimi, oil minister said recently.

Folashade Olubayo
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