TheCable

The Organization of Petroleum Exporting Countries (OPEC) says the end of petrol subsidy in Nigeria contributed to the decline in fuel exports to West Africa.

President Bola Tinubu had announced at his inaugural speech in May that his government would not fund subsidy – which has been used to keep petrol price below market reality.

OPEC, in its monthly oil market report on Thursday, said the ripple effect of removing subsidy in Nigeria was a 28 percent drop in the export of petrol to West Africa.

Coupled with subdued demand from the US, OPEC said the decline in exports to West Africa also led to a decrease in petrol crack spread.

The general pricing difference between a barrel of crude oil and the petroleum products refined from it is called crack spread. The prices of crude oil barrel and the offshoots from the commodity are not usually at par, hence, the spreads.

OPEC said: “Gasoline crack spreads in Rotterdam decreased, affected by subdued demand from the US and West Africa, as gasoline exports to West Africa were reported to have declined by around 28% following the fuel subsidy removal in Nigeria.”

The organisation said heavy turnarounds, also known as maintenance, of refineries also contributed to the decline.

Refinery turnarounds occur twice a year; spring (March to May) and fall (between August and November).

OPEC projected that going forward, gasoline crack spreads are set to remain under pressure with the onset of the colder season.

“However, this downside risk will be challenged by the ongoing refinery maintenance season and the subsequent decline in gasoline production levels, which could partially offset some of the aforementioned weaknesses,” OPEC said.

The report said gasoline crack spread against Brent – the global crude oil product benchmark – averaged $46.73 per barrel in September.