Low-sulfur crude differentials dropped in West Africa and Europe at the start of the week due to poor demand, following run cuts at European refineries, and with WAF grades providing heavy competition for European crude oil in both the Mediterranean and Northwest Europe.
"You've got to look at the global picture -- is the East taking as much from WAF as usual," said one trader Tuesday. "And is WAF oversupply from July [programs] causing oversupply in other regions."
There were still about 15 cargoes or approximately 15 million barrels of Nigerian crudes unsold left from the July loading program Monday, with Europe being the most likely home for material at this phase of the trading cycle.
But against a backdrop of thin refining margins, and rising freight rates out of West Africa, European demand for West Africa's light sweet crudes has been very low.
Offers have fallen steadily in the past week, sources said, with grades like Bonny Light falling below Dated Brent plus $2.00/b to four-month lows, and Brass River assessed down five cents on Monday at Dated Brent plus $0.95/b,its lowest since August 2012.
Further falls are expected by traders if demand remains this subdued.
Exacerbating the situation, Bonny Light and Escravos cargo injections were seen for July, traders said.
IMPACT IN EUROPE
The entire Mediterranean crude complex has dropped sharply over the last few weeks, weighed down by low demand and competing alternative crudes from West Africa, traders said.
"Margins are still not good," a crude trader said. "There are too many cargoes around -- specifically from West Africa."
On Monday, Aframax cargoes of Saharan Blend (FOB Algeria) were assessed at Dated Brent minus $0.15/b, their lowest in more than a year.
Kazakhstan's CPC Blend which, like Saharan, is naphtha-rich, was assessed at Dated Brent minus $1.73/b, holding at a near two-year low.
"CPC came off so much, and all of the usual buyers have already bought," one crude trader said, adding that there are still cargoes of the grade available at the prompt. "But people can't buy more because of mercaptan restrictions, so it is really feeling the impact from the margins."
In the North Sea, with a competitive offer and no buying interest, Troll fell to Dated Brent plus $2.00/b Monday, its lowest since Platts began assessing the grade on March 1, 2012.
The Oseberg differential fell to Dated Brent plus $0.71/b Monday, its lowest in eight months, according to Platts data.
Brent/Ninian Blend was also offered lower, and fell to Dated Brent plus $0.05/b, its lowest in seven months.
