West African crude oil differentials narrowed on Thursday as sharply higher shipping costs weighed on demand for the region’s crude, while a significant volume of October cargoes remained available in the market.

Nigeria is expected to load about 6% less crude in November than in October, according to preliminary loading programmes seen by Reuters, signalling a modest reduction in supply from one of Africa’s largest oil producers.

Meanwhile, traders said between five and eight Angolan cargoes for October loading remained unsold, while nearly 20 Nigerian October cargoes were still available.

Differentials for most West African crude grades fell by nearly $2 per barrel, according to one market source, with another trading source saying differentials for crude destined for Asia had also weakened.

The pressure comes as freight costs for oil tankers have surged. Shipping rates for the largest crude carriers, including those operating on West African routes, have reached record highs this month following increased attacks on commercial shipping.

Higher freight costs can reduce the attractiveness of West African barrels for overseas buyers by increasing the delivered cost of crude, potentially forcing sellers to lower differentials to maintain competitiveness.

Nigeria’s November Supply

Nigeria’s projected 6% month-on-month reduction in November loading volumes comes as the country’s oil industry continues to navigate production constraints, infrastructure challenges and changing international demand.

For Nigerian producers and exporters, weaker differentials combined with elevated freight costs could put additional pressure on export revenues, particularly for cargoes travelling longer distances to Asian markets.

Ethiopia-Djibouti Pipeline Plans

Separately, Ethiopia, Djibouti and Nigerian businessman Aliko Dangote plan to develop a $660 million refined petroleum pipeline linking Ethiopia and Djibouti, according to a spokesperson in Ethiopian Prime Minister Abiy Ahmed’s office.

The proposed infrastructure highlights growing efforts to strengthen petroleum-product logistics and regional energy connectivity in East Africa.

Source: Reuters
Reporting: Seher Dareen and Alex Lawler
Editing: Kirsten Donovan