Nigerian crude may eventually lose U.S. market

U.S. importation of Nigerian crude oil dropped dramatically in 2011 as some U.S. refineries remain out of use.  The decline is also attributable to the US preference for local crude, according to the Energy Information Administration (EIA).

This decline, the EIA disclosed, is partly due to non-utilization of two oil refineries in the vicinity of Philadelphia, particularly the Markus Hook and Trainer refineries.  These oil refineries are designed to operate on light, sweet crude and those from Nigeria closely resemble this crude type.  However, Nigerian crude tends to command a higher price versus other “heavier” types of crude and converting these refineries to adapt to the less expensive variety would call for huge capital investments.

Based on the EIA’s initial reports, the abrupt decrease in U.S. consumption of Nigerian oil was quite noticeable.  U.S. importation of Nigerian oil this January amounted to 449,000 barrels per day.  This translates to a 54 percent drop compared with importation figures a year ago in January, and likewise the biggest month-over-month drop recorded for the last 10 years.

The EIA further revealed that crude oil prices offered by Bakken, Eagle Ford, and WTI were more competitive versus those offered by Nigeria.  Sources say that Nigerian crude and those produced by Bakken and WTI have almost the same quality.

“Given the growing production from the Bakken and Eagle Ford formations and associated transportation constraints, these inland crudes have been selling at a discount to waterborne crudes on the Gulf Coast, providing refiners in that area further incentive to switch from imported crude to inland, domestically produced crude when available,” EIA reported.

Turning to locally produced crude may encourage U.S. oil suppliers in the area to further invest in oil production ventures and possibly draw new investors.