4 things you need to know before trading Bonny Light
October 30, 2014
1. Production
Bonny Light Crude Oil (BLCO) is produced in Nigeria from Chevron and Shell concessions. In this county, production and exploration are done by joint-ventures between corporations and the Nigerian government (NNPC – Nigerian National Petroleum Corporation). The typical output is around 540,000 bbls/day, which represents approximately 30% of Nigerian oil production.
2. Specifications
BLCO is a Sweet (0.15% of Sulfur) Light (API 35.30) Crude Oil of very high quality that is historically appreciated by European refineries and increasingly China in recent years because of its natural high yield of middle distillates. This grade has remained quite popular because it features as the crude product with the lowest sulfur content of the industry.
3. Terminal
BLCO exports are loaded from the Shell-operated Bonny Terminal that can accommodate Very Large Crude Carriers (2 mios bbls). However, the usual cargo size for BLCO is 950,000 bbls (ideally suited for Suezmax Carriers). The terminal was upgraded in 2009 to become one of the largest and most technologically advanced in Africa. It can process and export up to 1.25 mios bbls/day.
4. Force majeure
Due to the recurrent instability and oil theft in the region (as we have seen in our previous Newsletter), Shell has been forced to declare force majeure on Bonny Terminal on several occasions. It is therefore necessary to be aware of this risk that could cause important delays and pay particular attention to the Force Majeure clause in contracts when buying Bonny Light.
Price recap
The Brent Crude increased by only 0.19% from USD 111.95 to 112.17 between November 22nd and December 2nd. The Benchmark remained stable as OPEC is expected to keep its oil production unchanged. The month of November has seen Brent rose by 0.8% as unrest in Libya disrupted supply.
Futures curve
The future curve is again in backwardation as prices for forward delivery are lower than the spot price. This indicates low inventories and an incentive to sell now rather than later.