West African Crude Output Shifts Towards China, Driving Supply Deficit in Atlantic Basin

Strategic Insights -

China's demand for distillates and gasoline is soaring, prompting the country to seek alternative suppliers in West Africa to meet its rising demand. West African production is set to surge by over 500,000 barrels per day (b/d) to 4.88 million b/d this year, driven by the start-up of new crude streams. The US remains the largest buyer of West African crude, but China is increasingly turning to the region to diversify its supply and offset capacity constraints at its refineries.

Key Takeaways:

  • West African production is expected to surge by over 500,000 b/d to 4.88 million b/d this year, driven by the start-up of new crude streams.
  • China's demand for West African crude has doubled over the past two years to an average of 400,000 b/d in 2019, with 700,000 b/d imported in February, primarily from West Africa.
  • Nigeria's output is set to increase to nearly 2.7 million b/d, with the addition of four new streams, including Yoho, EA, Abo, and Amenam, which will reach a capacity of 450,000 b/d later this year.
  • Strong demand is encouraging Nigeria to continue producing above its OPEC quota, with output barely cut despite the lower OPEC quota from April 1.
  • China is expected to shift towards light sweet crude grades as it hits upgrading capacity limits, with Nigeria's light sweet crude becoming a prime target.
  • Other West African nations, including Chad, Equatorial Guinea, and Angola, are also poised to increase their crude exports, with Chad's heavy sweet crude exports reaching near capacity of 225,000 b/d.
  • West African crude output will also be driven by the start-up of new streams, including Equatorial Guinea's 110,000 b/d medium sweet Topacio and Angola's 80,000 b/d medium sweet Xikomba.

Statistics:

  • China's demand for West African crude has doubled over the past two years to an average of 400,000 b/d.
  • China's total crude imports in February surged to 2.6 million b/d, with 700,000 b/d coming from West Africa.
  • Nigeria's output is set to increase to nearly 2.7 million b/d, with 500,000 b/d added from four new streams.
  • West African production is set to surge by over 500,000 b/d to 4.88 million b/d this year.
  • The net supply deficit in the Atlantic basin will fall from 4.4 million b/d in 2002 to 2.5 million b/d this year.
  • The net deficit in Asia-Pacific will rise from 12.8 million b/d to 14.7 million b/d, driving a shift of nearly 2 million b/d from Western to Eastern markets.

Sources:

  • Argus, "West Africa: More crude for Asia-Pacific", 22 March, p20.
  • Argus, "West African production set to surge", (no date specified).