Nigerian Crude Steady But Militant Attacks in Focus
LONDON (Dow Jones Newswires), May 18, 2009
Values for key benchmark grades of physical Nigerian crude oil are holding steady in spite of a barrage of attacks by rebel groups on oil infrastructure in the Western Niger Delta over the weekend, traders of West African crude said Monday.
However, spot prices are likely to gain ground in the coming weeks if the security situation in the Delta deteriorates further and a large quantity of production is suspended, they said.
Market participants peg key benchmark grades Bonny Light and Qua Iboe at a premium of $1.20 to $1.40 over the North Sea benchmark, but expect to see prices rise quickly if unrest spreads across the oil-producing region.
"(BQ value) depends on any development following the Movement for Emancipation of the Niger Delta 'all-out-war statement," a trader based in London said.
Weak demand has meant there has been ample supply of Nigerian light, sweet crude available for June export in recent weeks, with as many as 15 cargoes of various grades still being offered towards the end of last week.
Although a rebound in gasoline margins in Europe has lent a little support, strong fuel-oil cracks and weak gasoil cracks have hurt demand for long-haul sweet crudes in both Europe and Asia.
Increased violence in the Delta over the weekend saw some initial short-covering on the crude oil futures market in London Monday. The Brent front-month contract traded on the Intercontinental Exchange was more noticeably volatile as its value is more closely linked to pricing of Nigerian crude.
Nigeria's main militant group has warned it plans to blockade key shipping channels in a bid to inflict further damage on the energy industry. Increased anxiety over exports from the country has seen some fluctuation in shipping rates recently. Last week, routes from the West African coast to the U.S Gulf initially rose from a freight rate of Worldscale 62.5 to 70, according to shippers, before falling 15 points to Worldscale 55 towards the end of the week.
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