Shale Oil Costing Nigeria Money As US Crude Oil Demand Drops By 63%

The importation of Nigerian crude oil by the United States plummeted drastically in the first quarter of this year as it crashed by 63.03 per cent when compared to the preceding quarter of last year. The U.S demand once accounted for about 40 per cent to 50 per cent of Nigeria's cargoes, but thanks to the popular shale oil, demand has collapsed.

In the fourth quarter of 2019, the United States imported 15.07 million barrels, but the demand dropped significantly in the first quarter of 2020, cutting down to 5.53 million barrels of crude oil. While breaking down the purchase per month of Q1 2020, the US Energy Information Administration stated that in January this year, US purchased 1.92 million barrels, in February, 1.93 million barrels was bought, while 1.68 million barrels was purchased in March.

The drastic fall in the US demand shows how Nigeria has been struggling to sell its crude oil cargoes amidst the Coronavirus pandemic which forced oil price to crash following lockdown measures that restricted movements and production across the world. AllNews had reported that in order to strengthen the oil price, oil producers have agreed to cut production to pump up oil price.

Shale Oil Costing Nigeria Oil Money

Aside from the lockdown and COVID-19 affecting US' demand for Nigerian crude oil, for years now, the demand has been dropping due to the rise of shale oil which is produced in the North American country. It is an unconventional oil produced from oil shale rock fragments by pyrolysis, hydrogenation, or thermal dissolution.

The rising acceptance of shale oil in the US market is causing the country to reduce its interest in crude, and this is affecting Nigeria, a country that largely depends on crude oil money.

The shale oil is eating into Nigeria's oil revenue, with US gradually reducing its demand over the years. As earlier stated, the US once accounted for 40 per cent to 50 per cent of Nigeria's oil export, buying as much as 358.92 million barrels from Nigeria in 2010, but that figure was slashed to 280.08 million barrels in 2011.

With the shale oil being similar to the Nigerian crude oil, the demand for Nigerian oil dropped further from 148.48 million barrels in 2012 to 87.40 million barrels in 2013 as the demand for shale oil led to a boom in shale production. And since then, the decline has continued.

When oil prices began to fall from $115 per barrel in the global market in 2014, the US further cut its importation of the Nigerian crude to 21.24 million barrels, according to the Energy Information Administration data. reflecting the challenge crude oil is facing from the shale oil rise.

The decline took a drastic fall when the US didn't purchase any barrel of Nigerian crude in July and August 2014 for the first time in decades. The same situation happened as well in June 2015 when export to the North American country was zero.