Barrels of crude oil
* Marketers fume, say policy is risky to business
Agency report
Nigerian National Petroleum Co. will start pricing its supplies against the monthly average of Dated Brent, the physical-crude benchmark, a company circular seen by Bloomberg News shows. Up until now, pricing has been based on Dated Brent’s average settlement in the five days after loading.
Traders said the switch will make the cargoes more prone to the kind of volatility that besets wider oil markets. The new approach may require increased use of hedging because of the less-precise timeframe that’ll be applied to cargo pricing, they said.
An NNPC spokesman didn’t immediately respond to requests for comment. The circular didn’t give a reason for the decision.
Knowing when to hedge can also be challenging, since loadings are sometimes deferred from late in the month to early the following month. NNPC plans to stick with initial nominated loading dates for pricing purposes, according to the circular.
The traders said it will be more difficult to compare the price of NNPC’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.
Source: Bloomberg News
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