MARKET WATCH: Nigerian unrest raises crude prices
Continued civil unrest in Nigeria caused the front-month crude contract to jump above $69/bbl June 18 on the New York market to the highest price level since mid-September.
HOUSTON, June 19 -- Continued civil unrest in Nigeria caused the front-month crude contract to jump above $69/bbl June 18 on the New York market to the highest price level since mid-September.
Labor unions for oil workers in Nigeria called for a general nationwide strike on June 20 to protest a government price hike on fuel for autos. Auto fuel is heavily subsidized in Nigeria, and the new administration wants to end that practice to free up cash. Workers also are protesting a hike in the value-added tax (VAT) and the sale of two refineries that employ union workers.
Meanwhile, gunmen occupied an oil pipeline switching center in Nigeria over the weekend, preventing local workers and security forces from leaving. Eni SPA said 24 Nigerian workers and soldiers are being held after the June 17 attack on a flow station it operated by its Agip subsidiary in southern Bayelsa state (OGJ Online, June 18, 2007).
There were later reports that a large number of villagers chased workers from a Chevron Corp. oil-transfer facility in the Niger Delta. Chevron said the villagers left the work site at the end of the day.
"With two incidents on oil installations and the strike threat, Nigeria dominated the [oil trade] sentiment," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. However, he said, "One of the incidents was nothing more than villagers invading an installation, asking for pocket money, and then leaving. The other is less clearly defined (in terms of action and destruction)…."
Jakob said the Nigerian government made some concessions to the unions overnight, agreeing to reduce the fuel price hike but not fully reverse it, to suspend the VAT increase, and increased salaries by 15%, backdated to January. He said fuel distributors who went out on strike June 15 have now ended that walk-out.
In the Houston offices of Raymond James & Associates Inc., analysts reported little change in crude prices in early trading June 19 as concerns eased over possible strikes by Nigerian and Brazilian oil workers. They said union leaders in both Brazil and Nigeria are scheduled to meet June 19 with their respective governments to try to avoid work stoppages. "Oil gained slightly over 1% [June 18] as markets reacted to possible supply interruptions in the aforementioned countries, and Middle East tensions continued as Iranian officials warned that Iran will not rule out using oil as a weapon if the US resorts to military action against the Islamic Republic over its nuclear program," Raymond James analysts said.
The July contract for benchmark US light, sweet crudes jumped by $1.09 to $69.09/bbl June 18 on the New York Mercantile Exchange. The August contract gained $1.08 to $69.92/bbl. On the US spot market, West Texas Intermediate was up $1.10 to $69.10/bbl. Heating oil for July delivery climbed 2.36¢ to $2.03/gal on NYMEX. The July contract for reformulated blend stock for oxygenate blending (RBOB) inched up 0.42¢ but was virtually unchanged at $2.26/gal.
The July natural gas contract dropped 22.6¢ to $7.69/MMbtu on fears that current hot weather in the US will dissipate over the next 2-4 four weeks. "After yesterday's sell-off, investors appear to be looking for direction," said Raymond James analysts. On the US spot market, however, natural gas at Henry Hub, La., continued to climb, up 8.5¢ to $7.67/MMbtu.
In London, the August IPE contract for North Sea Brent crude increased by 71¢ to $72.18/bbl. The July gas oil contract gained $5 to $628.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes was up 51¢ to $67.90/bbl on June 18.
Contact Sam Fletcher at firstname.lastname@example.org.