Following Nigeria’s removal of fuel subsidy, which mostly decimated domestic demand in the country and a regional market for smuggled fuel, one of Europe’s major markets for petrol has diminished and is now threatening to put pressure on European refiners.
The top two markets for European gasoline exports historically have been North America and West Africa (WAF), with Nigeria at the leadership. Because Europe produces more gasoline than it consumes, its refiners are dependent on exports to maintain profit margins.
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A steady decline in European refining margins in recent years, as competition from the Middle East, the United States and Asia grew, was reversed when fears of fuel supply shortages boosted profits after Russia’s invasion of Ukraine, according to a Reuters report.
So far, benchmark profit margins for gasoline in northwestern Europe have held firm at around $27 a barrel.
They have been supported by demand from North America, a shortage of high quality blending materials, disruption caused by low water levels inland and local refinery outages.
But analysts say the reduction of flows following the upheaval in Nigeria will increase pressure on European refiners, and any winners are likely to be newer Middle Eastern refineries.
At the end of May, Nigeria’s President Bola Tinubu scrapped a popular but expensive subsidy on the fuel, which cost the cash-strapped government $10 billion last year. Petrol demand in response fell by 28%, official data showed.
Symptomatic of the fall in demand, onshore gasoline stocks in Nigeria have climbed to 960,000 tonnes from an average 613,000 tonnes between January and June, said Jeremy Parker at the CITAC consultancy which focuses on Africa’s downstream energy market.
