Asian demand for Nigerian crude ends Brent’s collapse

Brent crude’s biggest price-rout in more than a year is coming to an end as the flow of West African crude to Asia helps disperse a glut, banks including Societe Generale SA, BNP Paribas and DNB ASA said.

A “price floor is forming” close to $100 a barrel for Brent, used to value more than half the world’s oil, as the surplus of Nigerian supplies is whittled away, Societe Generale said in a report Thursday.

The incentive for sending cargoes from the region to buyers in Asia is at its strongest in four years, data from PVM Oil Associates Ltd. show.

Chinese and Indian refiners bolstered purchases of West African crude to

the highest in at least three years, a Bloomberg News survey of traders indicates.

“We might be around the bottom for this price cycle,” Torbjoern Kjus, an analyst at DNB in Oslo, said. “Nigerian barrels moving to Asia again, to me that’s the first sign that the market’s starting to re-balance.”

A “glut” of oil in the Atlantic basin has shielded prices against the turmoil in Iraq, the International Energy Agency said on Aug. 12. Brent crude plunged 11 percent in the past two months as surging shale output in the U.S. dulls the biggest oil consumer’s need for imports, leaving an excess of supplies from producers such as Nigeria and Angola.

“The overhang of Nigerian supply has almost cleaned up and West African crude differentials have stabilised,”Mike Wittner, Societe Generale’s head of oil market research in New York, said in a report. These are “key steps towards stabilising Brent,” he said.

Chinese refiners bought 40 cargoes of West African crude to load in September, equating to about 1.27 million barrels a day, according to a Bloomberg survey of nine traders. It’s the most since Bloomberg started tracking the data in August, 2011. Companies in India bought 27 cargoes for this month, the most on record, the survey showed.

Brent for October settlement fell 0.2 percent to $102.09 a barrel on the London-based ICE Futures Europe exchange at 4:08 p.m., close to its lowest in 14 months.

The front-month Brent contract fell 5.6 percent in July, the biggest monthly drop since April, 2013.

The benchmark’s narrowing premium over the Middle East reference price, Dubai crude, is encouraging refiners in Asia to opt for supplies valued using Brent, such as Nigerian exports, Societe Generale and BNP Paribas said.

 “First reports are hinting at Nigerian crudes for September loading beginning to clear quite nicely and that they are doing so at a faster rate than expected,” David Wech, an analyst at consultants JBC Energy GmbH in Vienna, said in a report. Consequently, there is a “bottom in sight” for Brent prices.

Cheaper Brent-related crudes are also encouraging traders to ship North Sea oil to other regions for storage, according to DNB’s Kjus. Mercuria Energy Group Ltd. has chartered a tanker, currently anchored off the coast of England, to ship crude for storage at Saldhana on the west coast of South Africa, according to two oil traders with knowledge of the matter.

Businessday