US crude arrives at Dangote Refinery, heralding a transformation in global oil markets. Explore the implications for the industry.
Since January, the refinery has obtained 18 deliveries of American crude oil, accounting for roughly 30% of all cargo received to date–a total of 47 shipments.
Aliko Dangote, Africa’s wealthiest individual, built a refinery capable of producing 600,000 barrels per day with the goal of achieving fuel independence for Nigeria. S&P Global published an August 1 report emphasizing the facility’s quick success in reaching a production capacity of 400,000 bpd merely six months after its inception.
The refined products include diesel fuel, jet fuel, naphtha and fuel oils intended for international as well as domestic markets while petrol manufacturing is set to commence mid-August.
According to the report, the refinery’s activities are already having an impact on crude oil markets. This is particularly evident in the decrease of Nigerian crude oil shipments being exported due to its preference for US WTI Midland, a type of light and sweet crude oil.
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The demand from this facility is projected to result in a tightening market for both lighter Nigerian crudes as well as WTI Midland.
According to the report, a crude trader from West Africa indicated that if the refinery reaches maximum capacity, it could greatly impact the market for WTI Midland crude.
The Dangote refinery, originally intended for Nigerian crude processing, has the capability to process light and medium crudes besides that.
The refinery has already processed 170,000 barrels per day of Nigerian crude through 47 shipments with at least 20 from NNPC Limited. Additionally, its affordable cost makes US WTI Midland suitable for long-term supply contracts obtained by the facility management.
By July 31, WTI Midland was valued at $82.36 per barrel in Rotterdam which is slightly lower than Nigeria’s Bonny Light sold for $82.80 a barrel. Nevertheless, there were difficulties unloading specific shipments of WTI due to foreign exchange complications that persisted over time.
According to the report, the refinery’s activities have impacted global markets, especially in Europe which is a major buyer of Nigerian oil. Since its establishment, European purchases of Nigerian crude have reduced and this decline exceeds that experienced by American imports.
Crude supplies from Brazil, Egypt, Libya and Guyana have seen a rise lately. Conversely, Nigeria – an exporter in the past – has witnessed a substantial increase in WTI Midland imports. The shift is having repercussions on Asia and Europe which are critical markets for US crude.
Over the last two years, there has been a 20% increase in European imports of WTI Midland. This trend is due to sanctions imposed on Russian oil, which created gaps that needed filling.
On the other hand, Nigerian crude exports have decreased significantly from 1.5 million bpd during Q4 of 2023 to only 1.24 million bpd in Q2 of 2024.
Although there have been market fluctuations, the Dangote refinery has stated that it is not engaged in reselling imported crude oil from either the US or Nigeria.
