KEY POINTS
- Nigeria’s Bonny Light crude traded near $70 as Indian refiners booked 2 million barrels.
- Rising domestic demand from the Dangote Refinery is set to reshape Nigeria’s export profile.
- Geopolitical risks and OPEC+ supply increases leave global oil market outlook uncertain.
This week, Nigeria’s flagship Bonny Light crude recovered from previous drops, hovering around $70 per barrel as Indian refiners increased their purchases and geopolitical tensions in Europe sparked fresh worries about supply.
According to traders, India reserved roughly 2 million barrels of Nigerian crude for delivery in September and October, highlighting Abuja’s ongoing significance in one of the energy markets with the fastest rate of growth in the world.
The agreement is made at a time when about 40% of India’s imports are now discounted Russian oil, which the country has relied on since Moscow’s invasion of Ukraine.
Earlier in August, Bonny Light, which is valued for its low sulfur content and suitability for refineries in India, briefly hit $75 per barrel before falling back. Nigeria’s output has increased recently; in July, it averaged 1.5 million barrels per day, surpassing its OPEC+ quota for the second consecutive month.
India’s demand steadies Nigeria’s exports
Nigeria’s crude market dynamics have changed, as evidenced by the most recent purchases from India. Middle Eastern supplies and US shale exports posed a serious threat to Nigerian grades for many years. Even though Nigeria’s domestic demand is expected to increase significantly due to the Dangote Refinery ramping up, India’s appetite is currently providing a stable outlet.
The largest facility in Africa, worth $20 billion, started operations last year and is anticipated to source all of its crude domestically by the end of the year. It will change Nigeria’s crude trade by lowering exports while bolstering domestic refining capacity once it reaches its maximum capacity of 650,000 barrels per day.
While asset transfers from large international oil companies to local players have added momentum, security improvements in the Niger Delta have also helped stabilize output. However, Nigeria’s revenue outlook is still precarious due to the unpredictability of the Russia-Ukraine conflict and the apprehension of international markets over OPEC+ supply decisions.
After Ukrainian drone attacks sparked fires at Russian fuel export terminals and refineries, raising fears of disruptions, oil prices rose this week. In the meantime, US President Donald Trump reaffirmed his threats to impose new sanctions on Moscow unless a peace agreement was reached.
The outlook for crude is still uncertain, according to analysts, even though the US Federal Reserve’s anticipated rate cut in September might boost demand. This year, OPEC+ intends to increase supply by roughly 2.5 million barrels per day, which could cause the market to become oversupplied at a time when demand growth is slowing.
