Nigeria’s rush for petrol could save Europe’s sagging margins

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Nigeria’s rush to keep its citizens supplied with fuel is expected to boost purchases of European gasoline in December, offering a potential respite to European refineries and storage terminals threatened by an oversupply that has battered margins.

Nigeria has been on a gasoline buying spree after fuel queues built up at filling stations this month, even as the government sought to reassure drivers that there was no shortage.

Shipping and trade sources told Reuters that imports of gasoline to West Africa, including Nigeria, from Europe were expected to top 1 million tonnes in December, compared with 700,000 tonnes in October and roughly 800,000 tonnes in November.

Queues of motorists filling up are not uncommon before the Christmas holiday in Nigeria, a member of OPEC which exports crude but imports fuel because of a lack of refining capacity.

The government, which already has an eye on an election due in February 2019, has frequently touted its smooth management of fuel supplies to show its efficient handling of the economy. This has made it particularly keen to supply December’s dash for fuel and end panic buying.

Nigerian state oil firm NNPC, which recalled its head from a trip to London to manage the situation, has scrambled to buy cargoes held in floating storage, and has promised that its fuel depot would be open 24 hours to meet demand.

“Nigeria needs barrels now,” said Head of Oil Products research at Energy Aspects, Robert Campbell. “A lot of the floating storage off Lome and Lagos has been run down.”

Figures from industry monitor Genscape showed gasoline stored off the West African coast fell to almost 200,000 tonnes at the start of December from more than 1 million tonnes in July.

“The queues are gone, but it’s just a plaster,” a Nigerian importer said. “NNPC practically bought up all the gasoline offshore.”

The drawdown in floating storage follows weak gasoline cargo bookings in October and November from Europe to West Africa, where Nigeria is by far the biggest economy and largest fuel consumer.

Loadings were as low as 37,000 tonnes in the week of Oct. 27 compared with 568,000 tonnes in the week to Dec. 15, Genscape data showed.

Nigerian restocking will help compensate for lower purchases of European gasoline from elsewhere, such as the United States, where stocks have risen since early November and demand fallen.

Middle Eastern and Asian bookings of European gasoline have also stalled in the past week after an autumn buying spree to prepare for regional refinery maintenance early next year.

That slowdown pushed gasoline margins 15 percent lower on the week in northwest Europe, leading to a fall of more than a third to their lowest since mid-2016, according to analysts at Jefferies.

“Europe needs West African demand to perform well to keep the stockbuilds in check,” Energy Aspects said in a note.

Agency Report