Nigeria, which produces some of the easiest-to-refine crude that typically commands a premium, has 30 or more unsold April-loading cargoes, traders say, equal to 30 million barrels or 30 percent of daily world demand.
The Nigerian National Petroleum Corporation (NNPC) last week put the number as high as 50.
Globally, the oil market has lost around half its value this month as the coronavirus has led to a collapse its demand.
At the same time, supply is growing as major producers are pumping flat out to gain market share after Moscow refused to back deeper production cuts at a meeting of the Organization of the Petroleum Exporting Countries and its OPEC+ allies.
Demand has dropped as nations take unprecedented measures to limit the spread of the virus, cutting fuel demand. A lack of options for storage, as well as rising freight costs have also deterred buyers.
“It’s a very large overhang,” said a trader of Nigerian crude, who asked not to be named.
“It can be the best price and margin in the world, but there is no storage for crude and product as demand collapses and shipping cost is going through the roof.”
One trader expected differentials to go lower. Nigeria’s largest crude stream, Qua Iboe, valued at a premium of $3.00 a barrel to benchmark dated Brent in December, was offered at dated Brent minus 70 cents this week, two traders said.
That would be the lowest in many years. Qua Iboe BFO-QUA was last valued at parity with dated Brent in 2005, according to Refinitiv Eikon data.
The May loading programmes for Nigerian crude will emerge in the coming days and add another 50 cargoes or 50 million barrels to the already ample supplies.
Given the overhang, traders predict Nigeria will cut its official selling prices (OSPs) for April crude, which are expected imminently.
There is no sign of companies in Nigeria, Angola or the North Sea restraining production because of lower demand – if anything, they are maximising output to try to raise cash, trade sources say.
“At $30 a barrel they just want money,” one said.