New Telegraph

2024: NNPCL To Start Pricing Crude Supplies Against Dated Brent

The Nigerian National Petroleum Company Limited (NNPCL) will start pricing crude supplies against dated Brent crude in 2024, a step traders said may make handling the nation’s barrels more risky.

A company circular quoted by Bloomberg outlined that NNPCL will shift its pricing method, moving from basing prices on the average settlement of Dated Brent in the five days following loading to using the monthly average of Dated Brent, the physical-crude benchmark. 

According to the report, NNPCL plans to change how it prices its crude cargoes starting in January 2024, adding that this adjustment might introduce higher risk factors to the country’s crude supplies.

However, oil market traders mentioned in the report, that this shift in pricing strategy could potentially expose the cargoes to increased volatility like the fluctuations observed in broader oil markets.  

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The change in approach might necessitate a greater reliance on hedging strategies due to the less precise timeframe that will be used for pricing the cargo. 

Knowing when to hedge can also be challenging since loadings are sometimes deferred from late in the month to early the following month. NNPCL plans to stick with the initial nominated loading dates for pricing purposes, according to the circular.

The traders said it will be more difficult to compare the price of NNPCL’s shipments to Europe with cargoes from the Mediterranean and North Sea, as well as WTI Midland most of which are priced using the five-day system. That may make the nation’s barrels less competitive, they said.

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