Oil prices hit $80 a barrel on today(17/5/18) for the first time since November 2014 on concerns that Iranian exports could fall due to renewed U.S. sanctions and reduce supply in an already tightening market but Nigeria may lose out as Shell declared force majeure on the exports of Nigeria’s major crude oil, the Bonny Light, effectively cutting off sales of around 250,000 barrels per day (b/d) of the country’s crude from the market following the shutdown of the Nembe Creek Trunk Line (NCTL) by the operator, Aiteo Eastern E&P Company Ltd
Brent crude futures LCOc1 reached an intraday high of $80.18 while U.S. West Texas Intermediate (WTI) crude futures were up 57 cents at $72.06 a barrel, also their highest since November 2014.
President Donald Trump’s decision this month to withdraw the United States from an international nuclear deal with Iran and revive sanctions that could limit crude exports from OPEC’s third-largest producer has given strong tailwind to oil prices.
France’s Total on Wednesday warned it might abandon a multi-billion-dollar gas project in Iran if it could not secure a waiver from U.S. sanctions, casting further doubt on European-led efforts to salvage the nuclear deal.
A rapid decline in Venezuela’s crude production has further roiled markets in recent months.
“The geopolitical noise and escalation fears are here to stay,” said Norbert Rücker, head of macro and commodity research at Swiss bank Julius Baer.
“Supply concerns are top of mind after the United States left the Iran nuclear deal.”
Several banks have in recent days raised their oil price forecasts, citing tighter supplies and strong demand.
But high oil prices could hit consumption, the International Energy Agency warned on Wednesday, lowering its global oil demand growth forecast for 2018 to 1.4 million from 1.5 million barrels per day (bpd).
Asia’s demand is at record highs and with rising prices its crude could cost $1 trillion this year, about twice what it paid during the market lull of 2015/2016.
The IEA said global oil demand would average 99.2 million bpd in 2018, although U.S. bank Goldman Sachs said consumption would cross 100 million bpd “this summer’’.
Meanwhile, the Shell Petroleum Development Company (SPDC) on Thursday declared force majeure on the exports of Nigeria’s major crude oil, the Bonny Light, effectively cutting off sales of around 250,000 barrels per day (b/d) of the country’s crude from the market.
Brent crude, the international benchmark against which Nigeria’s crude oil is set, briefly hit $80.18 before pulling back to trade up 57 cents at $79.67 per barrel, Reuters reported.
US West Texas Intermediate (WTI) crude futures were up 41 cents at $72.30 a barrel, also their highest since November 2014.
As of Monday, Brent was up 20 cents at 77.32 dollars a barrel, while US West Texas Intermediate rose 10 cents to 70.80 dollars.
Mohammed Barkindo, secretary general of the Organisation of the Petroleum Exporting Countries (OPEC), attributed the development to efforts by OPEC and non-OPEC countries to re-balance the market through production freeze.
He said general, global inventories of crude oil and refined products dropped sharply in recent months owing to robust demand and OPEC-led production cuts.
“We have now been implementing this decision (declaration of cooperation) for the past 17 months with visible positive outcomes that have been widely acclaimed around the world,” Barkindo had said at the 22nd Oil & Gas Uzbekistan (OGU) conference on Wednesday.
A spokesman for SPDC told TheCable Petrobarometer that the force majeure was due to disruption in production following a leak discovered on the Nembe Creek Trunk Line, located in Rivers State.
“SPDC declared force majeure on Bonny Light exports effectiveky 08.00hrs, May 17, 2018 following the shutdown of the Nembe Creek Trunk Line (NCTL) by the operator, Aiteo Eastern E&P Company Ltd,” the spokesman said.
Force majeure refers to a clause in contracts that allows both parties to walk out of the contract when an extraordinary event or circumstance beyond the control of the parties happen.
The incident came barely 24 hours after the senate passed the 2018 budget that was anchored on an oil production of 2.3 million b/d and an oil price assumption of $51 per barrel.
Cutting off 250,000 b/d of the Nigerian crude from the international market is sure to trigger a further hike in global oil prices.
