Welcome to our guide to the energy and commodities markets powering the global economy. Today, reporters Alex Longley and Bill Lehane examine the influence that Nigeria’s new refinery will have on oil supplies.

In a finely balanced oil market, Nigeria has suddenly reemerged as a key player.

During the past few weeks, actions by the country’s massive Dangote refinery have moved prices, with purchases of US barrels initially boosting the crude futures curve before a decision to sell them sent oil tumbling.

Once fully operational, the plant outside Lagos will be able to process 650,000 barrels a day, rivaling the largest sites in the US and more than 50% larger than Europe’s biggest refinery.

A look at International Energy Agency data this week shows why that’s so important.

Even if OPEC+ cancels planned supply hikes, there will be a surplus of about 860,000 barrels a day next year. The group currently plans to add 540,000 barrels a day next quarter.

Refinery ramp-ups are complicated, and there’s already been at least one delay. But once the site starts churning out gasoline, it will transform fuel markets in the region and upend long-established trade flows, particularly in Europe, where Nigeria currently purchases much of its supplies.

Aliko Dangote, the billionaire behind the plant, said last month the plan is for it to start producing the fuel in August, though others are doubtful.

“The refinery’s gasoline is unlikely to hit the market until at least September,” consultant FGE wrote this month, citing issues with some of the plant’s units.

Then there’s the question of feedstock.

The facility was built on a dream of Nigeria consuming its own crude. That’s why there was an uproar when Dangote started buying US supplies.

Recently, the country announced plans for its refiners to pay for oil in local currency and to consume as many as 445,000 barrels a day of domestic product. Still, it’s unclear how the latter will happen.

But if it does, that will mean less crude for current buyers, notably in Europe.

It also means that in an oil market focused on war, economic slowdowns and output curbs, Nigeria will be a surprisingly hot topic among traders in coming months.

Small modular reactors are a popular topic in the nuclear-energy world, with more than 80 designs in development. For years, the industry has presented the technology — which typically has an output capacity of less than 300 megawatts — as a tonic for the high costs and schedule overruns associated with large reactors. Yet with construction budgets spiking and only two modern SMRs operating globally, questions about their viability persist, BloombergNEF says.

By: Bloomberg, Alex Longley and Bill Lehane / 15 August 2024