1/4-1/3 of Nigerias Oil supply nocked out by the Nigerian Rebels over teh weekened and supposedly this will beocm fairly common place as Rebels concentrate on OFFSHORE facilities where they have not focused before.
Oil Prices Leap After Attacks in Nigeria
Sign In to E-Mail This
Printer-Friendly
Reprints
Save Article
By JAD MOUAWAD
Published: February 20, 2006
Oil prices rose 2.6 percent today after a series of violent attacks by militants in the Niger Delta that shut down nearly a fifth of Nigeria's oil production.
Brent crude oil for April delivery rose $1.57 a barrel to $61.46 a barrel on London's ICE Futures exchange. Trading in the United States was closed because of Presidents' Day.
Tensions in the oil-rich delta have flared since Saturday after militants kidnapped nine foreign oil workers, set pipelines on fire, and disrupted a major export terminal in the latest series of clashes against the central government.
As a result, Nigeria's oil production has been cut by 455,000 barrels a day out of a total of about 2.5 million barrels a day, according to Royal Dutch Shell, the main foreign producer in Nigeria.
The threat to oil supplies from Africa's largest producer comes at a time of heightened concerns over the security of supplies given the global tightness in production and the rising demand for oil. News agencies reported that the rebels had threatened more violence in a campaign to free two ethnic leaders.
Nigeria is the fifth-largest importer to the United States, after Mexico, Venezuela, Canada and Saudi Arabia. Nearly half of Nigeria's oil exports go to the United States.
"The incidents in Nigeria are happening at a time when geopolitical events seem to be happening at a near-continuous rhythm — such as production problems in Iraq, tensions in Iran and in Venezuela," said Frédéric Lasserre, the head of commodity research at Société Générale in Paris. "It's a long list and it fosters a climate of very volatile oil markets."
Nigerian oil is particularly prized by refiners, especially in the United States, because it is of a light, sweet variety that is easier and cheaper to refine than the thicker and sulfur-rich kind that comes from the Middle East or Venezuela.
According to Royal Dutch Shell, the Forcados loading platform, which is about 20 kilometers offshore, was set on fire and a pipeline was blown on Saturday. As a sign that the attacks seemed well coordinated, nine foreign contractors who were working on a pipe-laying barge were kidnapped, also on Saturday. They were three Americans, two Egyptians, two Thai, and British and one Filipino national, working for Houston-based Willbros Group.
Another pipeline was damaged by an attack today, said Caroline Wittgen, a spokeswoman for Shell in London.
Analysts said that the weekend attacks showed that the armed groups were willing to step up their pressure on the government by targeting offshore oil facilities, which had largely been spared so far.
"We would expect the potential for further chaos in Nigeria to provide a floor for prices above $60, and we expect that Nigeria will continue to be a major issue in terms of supply security," Kevin Norrish, an analyst at Barclays Capital in London wrote in a note to investors.
Armed ethnic groups in the Niger Delta, one of the country's poorest areas, have been fighting for years for a better distribution of the country's oil wealth.
Recently, they've stepped up their attacks against foreign oil companies, in protest against the government's crackdown on the theft of oil, a common practice known as "bunkering," and the arrest of a prominent militia leader.
Since mid-December, regular attacks in the Western part of the delta have regularly shut down about 10 percent of the country's crude oil production. Four foreign workers were abducted in January by a splinter group called the Movement for the Emancipation of the Niger Delta and were held three weeks before being released.
"Such escalating attacks are likely going to be the norm, rather than the exception, for the remainder of 2006," said the Eurasia Group, a New York based consultant. It said that the "well organized and sophisticated attacks against oil installations this year will likely regularly disrupt about 10 percent to 20 percent" of Nigeria's supplies.
One mitigating factor might be the high level of commercial stocks held in consuming countries, which is having a muting effect on the oil markets.
"The markets are very well supplies right now," said Mr. Lasserre. "Stocks are at a high level and buyers are not queuing up at the door of producers asking for more oil."
