oil attacks hangs over big exporter to U.S.?

naija4real · Apr 13, 2011

tribes, eh? I wonder whether we have tribes in China....

Emerging Markets Report

April 12, 2011, 6:27 p.m. EDT
Nigerian elections may spur next oil supply shock
Risk of politically sparked oil attacks hangs over big exporter to U.S.

By Myra P. Saefong, MarketWatch

SAN FRANCISCO (MarketWatch) — Elections in Nigeria, Africa’s largest oil producer, may be the source of the next oil shock, adding to concerns over global supplies stoked by fighting in Libya and the Middle East.

TRADING STRATEGIES: MARCH
Trouble ahead?
Japan's crisis, turmoil in Europe and unrest in the Middle East have investors worried that we’ll all be thrown back into the throes of global recession.

The country’s first round of government elections Saturday was marred by violence, with a fatal bombing at the election commission’s office in Suleja a day before. A presidential election is scheduled for April 16, and gubernatorial elections have been set for April 26.

Dissatisfaction with the election process could lead to sabotaged oil pipelines and attacks on production, a reprise of Nigeria’s experiences over much of the past decade. A hit to Nigeria’s output would add more support to oil prices that recently topped $126 a barrel in European markets and touched $113 in New York Monday before Tuesday’s sharp retreat. See Futures Movers report on crude’s retreat and full story on an analyst calling for a 17% pullback in Brent crude futures.

The March turmoil in Libya demonstrated how “daily oil production at the margin, even if only 2% of global market demand, can spike the price of oil,” said Mark Williams, a risk-management expert who teaches finance at Boston University.

It was an oilfield fire last week in Libya that contributed to a more than 2% jump in oil futures Friday to their highest level in over 30 months.

Nigeria has a similar market share of world oil production to Libya’s, putting it in a position to jolt global oil markets if output there is curtailed. Nigeria produced slightly more than 2.2 million barrels a day in 2009, according to the U.S. Energy Information Administration’s latest data on the country. That output level made Nigeria the biggest oil producer in Africa — and 14th among the world’s top oil producers.

For U.S. oil buyers, Nigeria is even more important than Libya. Nigeria, a member of the Organization of the Petroleum Exporting Countries, is the fourth-biggest supplier of crude-oil imports into the U.S., after Canada, Mexico and Saudi Arabia.

In domestic affairs, oil plays an outsized role, as Nigeria’s largest export and its main source of foreign currency. Against this backdrop and a history of corruption — Transparency International ranks Nigeria as one of the 50 most corrupt countries — the energy complex there is particularly vulnerable if parties protest the election as unfair.

“The upcoming [presidential and gubernatorial] elections can produce greater uncertainty and political unrest,” BU’s Williams said.

Militants have been frustrated by the lack of benefits from oil production in the oil-rich nation. While Nigeria’s oil production is owned by the federal government, an estimated 80% of oil revenue goes to 1% of the population.
Gadhafi meets with African leaders

A delegation from the African Union met with Libyan leader Moammar Gadhafi over the weekend in a diplomatic effort to stop the bloodshed in Libya. Video courtesy of Reuters.
‘A big ‘if’’

Nigeria’s current president, Goodluck Jonathan, is widely expected to win re-election, but his People’s Democratic Party is under pressure to stave off a cut in its majority in the National Assembly.

“The elections in Nigeria, if they result in reform of corruption and a distribution of oil profits to the general populace — either through direct payments or through infrastructure projects which create local jobs, could slow the attacks on oil facilities in the Niger Delta region,” said James Williams, an economist at WTRG Economics.

“However,” WTRG’s Williams said, “it’s a big ‘if.’ ”

If Jonathan wins the presidential election “it may mean continued problems from MEND, which doesn’t view him favorably,” Williams added.
Cantor Fitzgerald's Pado on markets

Cantor Fitzgerald U.S. strategist Marc Pado talks to Paul Vigna and Kate Gibson about his current outlook for the financial markets.

MEND, the Movement for the Emancipation of the Niger Delta, is the main group that has been attacking oil infrastructure for political objectives, according to the EIA.

MEND has criticized Jonathan’s handling of late President Umaru Yar’adua’s amnesty program, which had been meant to help achieve a solution to unrest in the Niger Delta region.

Since December 2005, Nigeria has experienced increased pipeline vandalism, kidnappings of oil workers for ransom, and militant takeovers of oil facilities in the delta, according to the U.S. Energy Information Administration.

Attacks on oil facilities followed the April 2007 Nigerian presidential election. Read more about the 2007 election’s impact on oil.

And in 2008, a military crackdown on tribes in the Niger Delta caused a “dramatic decline in oil production and helped to raise the price of global oil to $145 a barrel,” according to BU’s Williams.

The parliamentary polls held April 9 had already been postponed by a week due to “logistical problems,” according to news reports, and “a clear concern now is that Nigeria will witness a repeat of the ballot-box stuffing, voter intimidation and wholesale fraud that marred the 2003 and 2007 polls,” analysts at Barclays said last week.

This history of politically motivated pipeline attacks has prompted some analysts to warn the nation’s production could suffer.

“In a corrupt country like Nigeria, oil and who controls it can also be a destabilizing force,” said BU’s Williams.

WTRG’s Williams expects that potential attacks from MEND would involve onshore facilities, he said, and not even in a worst-case scenario result in a total interruption of exports. Under that scenario, “Nigeria would temporarily lose a half million [barrels per day] of its current 2.5 million [barrels per day],” he said. So “Nigeria is certainly on our list of countries at risk of a supply interruption.”

Analysts at Barclays warned that the “traditional perception that offshore facilities are off-limits for militants was greatly compromised by the successful 2008 attack on Shell’s Bonga offshore platform,” and the “likelihood of sabotage to oil infrastructure remains elevated.”
Waiting game

The biggest impact on the oil market may come after the election results are in.

“Although the [oil] market may react to uncertainty pre- and post-elections, the key thing as it effects operations will be how the various groups like MEND view the potential for working positively with any new government,” said Lew Watts, chief executive officer of the global energy adviser Lew Watts & Associates. “Their actions affect the levels of disruptions across the Delta.”

So the fog surrounding Nigerian oil production isn’t likely to lift anytime soon.

Whether the current president or one of the dozen candidates is elected, the capacity of tribes of the oil-rich Niger Delta to grab more oil dollars will set the level of oil-production uncertainty in motion, said BU’s Williams.

“Should tribes succeed in extracting greater oil money, it will be at the cost of poorer Muslim tribes of the north — a group that considers sabotage and destruction of pipelines as the No. 1 way to gain attention,” Williams said.

“Either way,” he said, “current political uncertainties will ensure that the new price floor remains well over $100 per barrel.”
Click to expand...

Soulthinker · Apr 13, 2011

The speculators will have a field day if Nigeria explodes into violence. Gas will go up to $6 a gallon.

Sign In

Register

oil attacks hangs over big exporter to U.S.?

naija4real New Member

Soulthinker Well-Known Member

Share This Page

White Women Black Men.com