China has disclosed that it will cut imports of West African oil to the lowest level in seven months this month due to increasing cost of shipments.
However, the revenue impact of the country’s lower import volume on the affected countries, including Nigeria, might be mitigated by South Korean’s import from the sub-region, which is projected to reach 11-year high as U.S. sanctions hit Iranian crude supplies.
According to news report by Reuters on Tuesday, West African loadings to Asia will fall to about 2.33 million barrels per day (bpd) this month, representing about 70 percent of total exports from Angola, Nigeria, Republic of Congo, Ghana and Equatorial Guinea.
The projected decline in exported oil volume from the sub-region is based on Reuters calculations, shipping brokers and Refinitiv Eikon data.
The figures compare to October’s 2.52 million bpd, or 75 percent of total regional exports.
Reuters reported: “Demand from Asian refiners for Nigerian and even Angolan crude, which tends to be favoured by Chinese buyers, sagged over the course of October and early November, as higher shipping costs made the trip uneconomical.
“Shipping rates for carrying West African oil on a very large crude carrier (VLCC) to China hit a nine-month high in October of more than $50,000 a day DFRT-WAF-CN”, it added.
It would be recalled that the International Energy Agency stated in its report this month that falling Iranian exports, driven down by U.S. sanctions, were pushing Asian refiners to source oil from further afield with longer journey times, driving up shipping costs.
U.S. investment bank Jefferies said average VLCC spot charter rates rose to more than $40,000 a day in late October for the first time since the fourth quarter of 2016.
China will import about 1.33 million bpd of mostly Angolan crude in November, down from October’s record 1.935 million bpd, while South Korea will take about 167,000 bpd of West African oil.
South Korea has till now typically taken only occasional West African cargoes, because it has tended to rely more heavily on Middle East or North Sea suppliers.
But it has now said it would cut Iranian purchases because of U.S. sanctions on Iran and has sought out other suppliers, starting with a cargo of Congolese Djeno that loaded this month.
Reuters reported further that India’s refiners will take 567,000 bpd of West African crude in November, up from 452,000 bpd in October, most of which was purchased via tenders rather than on the spot market.
Glencore, Shell, Norway’s Equinor and Chevron, among others will supply the Indian market with a combination of Nigerian and Angolan grades.
