Oil suppliers in the United States have surged into markets traditionally dominated by Nigeria and other members of the Organisation of the Petroleum Exporting Countries (OPEC), posing a significant challenge for Africa’s top oil exporter, News About Nigeria reports.
Since the imposition of Western sanctions on Russia in 2022, US oil exports have soared, setting five new monthly records, according to data from the US Energy Information Administration (EIA).
These sanctions, combined with trade restrictions on Venezuela, have reshaped global oil trade dynamics, allowing US suppliers to capture markets traditionally dominated by OPEC and its allies.
This change is especially noticeable in India, a major buyer of Nigerian crude oil, where sanctioned Russian supply has gradually been replaced by US crude.
The refusal of Indian refiners to accept cargo from tankers owned by the sanctioned Russian firm Sovcomflot PJSC has further facilitated this trend.
“US production is going up and OPEC and Russian production is going down, so the US, by definition, is going to have more market share,” said oil consultant turned hedge fund manager Gary Ross.
Data from global ship trackers indicates that US oil shipments are expected to reach a record 2.2 million barrels per day (bpd) in March.
This surge is not only due to sanctions against Russian oil but also to the integration of West Texas Intermediate (WTI) into the dated Brent benchmark, which has increased the presence of US crude in the European oil market.
As US production continues to rise, every incremental barrel is likely to be exported, according to analysts.
The surge in US oil exports presents a challenge for Nigeria, which heavily relies on oil revenue to finance its budget.
The Federal Government hopes to generate N7.69 trillion in oil revenue to partly finance the 2024 budget of N27.5 trillion.
However, the resurging shale oil production in the US poses a threat to Nigeria and other OPEC members, who previously experienced a recession due to a supply glut caused by shale oil.
Nigeria needs the oil price to rise or remain above its revised budget benchmark of $77.96 a barrel to feasibly raise N7.69 trillion.
The proposed oil revenue for 2024 is over three times the amount budgeted for 2023.
Analysts warn that an over-reliance on crude oil revenue could have catastrophic consequences for Nigeria, urging the country to diversify its economy to mitigate risks associated with fluctuations in oil.
