West African oil trade slows as sellers hoard cargoes amid Mideast crisis

The Big Picture: In an unusual sign of how the war in Iran is warping global energy markets, the trade in West African crude oil has slowed to a crawl, as sellers hold back their cargoes in anticipation of even higher prices.

Why it matters: This is a high-stakes game of chicken with significant economic consequences. With the Strait of Hormuz effectively closed and Middle Eastern supply disrupted, West African oil should be in high demand. However, sellers—including major oil companies and trading houses—are choosing to sit on their supply. They are betting that the market will tighten further, allowing them to sell at a bigger premium later. This hoarding behavior is contributing to price volatility and making it harder for refiners, particularly in Asia, to secure the barrels they need.

Here’s a breakdown of the market dynamics:

• Holding Out for a Higher Price: Despite a global supply crunch, about 20 cargoes of West African crude for April loading remain unsold. This is not due to a lack of demand, but a strategic decision by sellers who can either refine the oil themselves or wait for a desperate buyer to make an exceptionally high bid.
• Prices Already Soaring: The strategy is already paying off for sellers. The price for prime Nigerian Bonny Light crude, for example, has hit its highest premium over the Brent benchmark since the 2-22 invasion of Ukraine.
• Freight Costs Add to Pain: A surge in freight costs is further complicating the trade. With the Red Sea also a conflict zone, shipping routes to Asia—a key market for West African oil—are longer and more expensive. This is making buyers like China opt for cheaper, albeit politically riskier, Russian and Iranian crude.
• Impact on Consumers: This market squeeze ultimately translates to higher prices at the pump and for heating oil around the world. The longer the disruption in the Middle East continues, the more power sellers of alternative crude supplies will have to dictate prices, with consumers bearing the final cost.

What’s next: The market is watching to see who blinks first. Will Asian refiners be forced to pay the high prices demanded by West African sellers, or will a potential de-escalation in the Gulf bring Middle Eastern supply back online and cause the sellers’ gamble to backfire? The outcome will have a significant impact on global oil prices in the coming weeks.