* Unsold cargoes linger due to glut of light oil
* U.S. oil more competitive after Brent's OPEC boost
* Planned cuts are mostly to sour crude
By Libby George
LONDON, Dec 16 Nigeria, one of two OPEC
countries completely shielded from any cuts to its oil
production, was in line for a windfall from the group's
agreement late last month to shore up the price of crude.
Instead, the beleaguered West African nation is struggling
to sell its rising oil production as higher benchmark prices
slammed shut trade routes and did little to stem an excess of
light, sweet oil, leaving millions of unsold barrels.
The decision in November by the Organization of the
Petroleum Exporting Countries to trim output sent benchmarks
soaring; dated Brent is now more than 20 percent above
mid-November lows. The price boost was good news for oil
producers from Texas to Indonesia.
Nigeria, which has been battling militant attacks in its
oil-producing Delta region, got a reprieve from cuts along with
Libya, which has been pumping at around a quarter of its
capacity for much of this year due to its own political turmoil.
But rather than a gold-lined gift, Nigeria's oil is finding
itself cut off from buyers; some 30 million barrels of it has
yet to sell, with more loadings due within a week and output
"They've just closed their shutters," one trader said of
potential buyers. "There's no arbitrage," the trader added,
referencing potential trade routes to other regions.
One catch is that the spike in dated Brent, the baseline on
which Nigerian exports are priced, made U.S. barrels
comparatively cheaper and more attractive.
Because U.S. producers were not part of any cut, the
discount of their West Texas Intermediate benchmark
doubled relative to Brent CL-LCO1=R to $2.44 a barrel on Nov.
30, the day of the deal, and still stands at more than $2.
This opened a flood of exports from the United States to
Asian buyers who might otherwise take Nigerian oil, and boxed
Nigerian oil out of its outlet at refineries on the U.S. East
TIGHTER MARKET FOR SOUR
The other issue is that because Nigeria and Libya are some
of the only OPEC producers of "light" crude, nearly all of the
cuts will come from "sour" crude, which though usually less
valuable because of its higher sulphur is now in demand as
buyers await a tighter market for it.
"Buyers are loading as much sour (crude) as they can. The
light sweet is not as interesting - there is a glut of it," said
Andrew Wilson, head of energy research with BRS Brokers.
BRS Brokers said there were nearly 12 million barrels of
light North Sea oil unsold in ships at the time of the OPEC
deal. This whittled down to just under 3 million, but rising
production of light crude from Libya, Kazakhstan and Russia
means buyers have a suite of choices - and could steer clear of
a country whose exports are still seen as unreliable.
"If they start taking crude from Nigeria again, they're not
sure they'll get it next month," Wilson said.
Still, even if they are forced to cut price differentials
and wait longer to find buyers, Nigeria stands to make some $9
million more for each exported cargo following the deal, which
is no small salve to a country battling an economic crisis.
"They're getting some benefit from the higher flat price,"
said Olivier Jakob, managing director of PetroMatrix. The slow
sales, he said, "show the need for those cuts - the oil needs to
"If they are respected, the physical impact would be later.
It will take some time."
(Reporting by Libby George; Editing by Dale Hudson)