The global oil trade witnessed a notable shift in early 2024, with the United States becoming a net exporter of crude oil to Nigeria for the first time. This unprecedented reversal stemmed from a confluence of factors, primarily driven by the operational commencement of the Dangote refinery in Nigeria and reduced crude demand on the U.S. East Coast due to refinery maintenance. The Dangote refinery, a massive project years in the making, significantly ramped up Nigeria’s crude oil requirements, creating an opportunity for U.S. crude exports to fill the gap. This shift temporarily altered the traditional dynamic between the two nations, with Nigeria typically being a source of crude imports for the United States.
The surge in U.S. crude exports to Nigeria was particularly evident in February and March 2024. During these months, U.S. crude exports to Nigeria reached 111,000 barrels per day (bpd) and 169,000 bpd, respectively. Concurrently, Nigerian crude exports to the U.S. experienced a sharp decline, falling from 133,000 bpd in January to 54,000 bpd in February and 72,000 bpd in March. The decrease in U.S. imports of Nigerian crude was largely attributed to planned maintenance at the Phillips 66 Bayway refinery in New Jersey, which temporarily reduced the region’s processing capacity and thus its demand for imported crude. This confluence of increased demand from Nigeria and reduced demand within the U.S. created the perfect storm for the unusual trade flow.
The Dangote refinery, poised to become a major player in the African refining landscape, played a pivotal role in reshaping the crude oil trade dynamics between the U.S. and Nigeria. The refinery, with a projected capacity of 700,000 bpd by December 2024, began processing crude in January 2024. This marked a significant milestone for Nigeria, transforming the nation from a primarily crude-exporting country to one with significant refining capacity. The refinery’s initial reliance on imported crude, particularly from the U.S., contributed to the surge in U.S. exports. Aliko Dangote, President of the Dangote Group, stated that the refinery imported up to 10 million barrels of crude oil from the U.S. monthly, highlighting the significant volume of trade generated by this new demand source.
However, market analysts caution against viewing this shift as a permanent realignment of the global oil trade. The unique circumstances that facilitated the surge in U.S. exports to Nigeria, namely the Dangote refinery’s initial reliance on imported crude and the temporary reduction in U.S. refining capacity, are unlikely to persist in the long term. As the Dangote refinery stabilizes its operations and secures more domestic crude supplies, the need for imported crude, particularly from the U.S., is expected to diminish. Furthermore, the resumption of normal operations at the Bayway refinery in April and unplanned maintenance at the Dangote refinery later in the year contributed to a normalization of trade flows.
Industry experts suggest that the observed trade pattern was more of a temporary phenomenon than a structural change. Eli Tesfaye, a senior market strategist at RJO Futures, described the situation as a snapshot of a very fluid market, rather than a permanent realignment. This perspective is echoed by Giovanni Staunovo, an analyst at UBS, who acknowledges the role of the new refinery and domestic supply issues in Nigeria in driving the unusual trade flows. However, he notes that with the Dangote refinery aiming to secure more domestic crude and potentially exploring other crude grades, the sustained flow of U.S. crude to Nigeria is uncertain.
In conclusion, the shift in U.S.-Nigeria crude oil trade in early 2024 represents a fascinating case study in the dynamics of the global oil market. Driven by the Dangote refinery’s start-up and temporary disruptions in U.S. refining capacity, the U.S. became a net exporter of crude to Nigeria, a historical anomaly. However, market experts believe this situation to be transient, anticipating a return to more traditional trade patterns as the Dangote refinery optimizes its operations and focuses on securing domestic crude supplies. The episode underscores the complex interplay of factors influencing global oil flows, highlighting the responsiveness of the market to changing supply and demand dynamics.
