Official prices for Nigerian crude have hit their lowest in at least a decade as a nagging oversupply of physical oil takes its toll.

The Nigerian National Petroleum Corp (NNPC) lowered the official selling price for its largest crude oil stream, Qua Iboe, to dated Brent plus 35 cents per barrel, the lowest differential since May 2005.

Bonny Light, once in demand for its high yield of valuable motor fuels, fell to dated Brent plus 23 cents, with the differential below May 2005 levels, traders said.

The drop follows North Sea crude, which hit a 10-year low earlier this week as all Atlantic Basin sellers, particularly those with light, sweet oil, struggle to place cargoes.

“They’re playing along now, towing the line with other OPEC members to try and capture market share,” said Kash Kamal, senior research analyst with Sucden.

Nigeria is having a particularly hard time with the glut, as the shale boom in its once-key market the United States has all but shut out its exports.

While the United States once absorbed more than a third of Nigeria’s nearly 2 million barrels per day (bpd) of exports, this slumped to close to 60,000 bpd on average for the first three months of this year, according to the U.S. Energy Information Administration.

Sellers of Nigerian crudes have aggressively pushed into new markets from Uruguay to China, but are coming up against other crude producers, including fellow members of the Organization of the Petroleum Exporting Countries, as well as new refineries that are geared towards heavier oil.

As a result, as much as 10 million barrels of Nigerian grades that have already loaded are floating in vessels, taking months in some cases to find buyers.

The issue is also taking a toll on the country at large, which is heavily reliant on oil revenues to balance its budget.

“It’s a really messy situation,” Kamal said.

“Saudi Arabia, with a marginal cost per barrel at around $30 and substantial cash reserves, can afford to stick it out with crude at these levels. But Nigeria needs crude around $115-120 to balance their budget.”

Source: Reuters