Forcados stands out as one of the few profitable crude grades in a tightening global market where June supply is already looking scarce
Physical crude differentials in Europe are expected to climb again in the coming weeks as the market effect of recent price-containment measures wears off, with Nigerian medium sweet Forcados emerging as one of the few crude grades that remained reliably profitable for European refiners throughout the recent period of extreme market stress.
Crude differentials hit record highs in the first half of April, with many grades reaching premiums of more than $20 per barrel above the North Sea Dated benchmark amid acute shortages caused by restricted flows through the Strait of Hormuz. These levels severely eroded refinery margins for most grades, with returns from running US WTI, Norway’s Johan Sverdrup, and Brazil’s Buzios all turning negative for northwest European refineries due to the combination of record differentials and expensive freight.
The situation partially eased from mid-April following price mitigation measures, including inventory drawdowns and the release of crude from floating storage. China reduced imports by nearly 2 million barrels per day by cutting refinery runs and reselling some cargoes back to the spot market, while US crude stock releases sent approximately 400,000 barrels per day of discounted crude to Europe for arrival in May and June. These twin factors helped crash prompt prices and partially restored refinery profitability — though margins remain $10 to $15 per barrel below March record highs.
Traders now warn that the June market is tightening again. Cargoes trading further ahead are already at substantial premiums to prompt supplies — a signal of anticipated scarcity. Prompt UK Forties crude, which had been trading at nearly a $9 per barrel premium to CPC Blend in the second half of April, has since moved to a discount, further reflecting the shift in supply dynamics.
Differentials are unlikely to return to the extreme levels seen in April, traders said, but pre-war levels are considered unsustainable while Hormuz remains closed. Forcados continues to hold its value due to superior product yields, giving Nigerian crude a rare competitive edge in a market under significant structural stress.
Sources: orientalnewsng.com