The Nigerian National Petroleum Company Limited (NNPC Ltd.) has announced changes on how its crude oil cargoes would be priced from next month.
In a circular, it said pricing would now be supplied against the monthly average of Dated Brent, the physical-crude benchmark.
Daily Trust reports that the state oil company has been engaging its pricing based on Dated Brent’s average settlement in the five days after loading.
But traders who spoke with Bloomberg news said the switch would make cargoes more prone to the kind of volatility that besets wider oil markets.
It said, “The new approach may require increased use of hedging because of the less-precise timeframe that will be applied to cargo pricing.
“Knowing when to hedge can also be challenging, since loadings are sometimes deferred from late in the month to early the following month. NNPC plans to stick with initial nominated loading dates for pricing purposes,” according to the circular.
The traders said it will be more difficult to compare the price of NNPC’s shipments to Europe with cargoes from the Mediterranean and North Sea, as well as WTI Midland — most of which are priced using the five-day system.