Nigeria’s main militant group, the Movement for the Emancipation of the Niger Delta, reportedly fired on six oil industry ships today and threatened an attack that will cause an “economic tsunami” in the world’s oil market.
Last week, militants executed coordinated attacks on a hotel and two police stations in Port Harcourt, killing at least 13 people in the oil-rich part of the nation. That helped spark oil’s rise to $100/barrel. But today, despite attacks on these ships, oil prices have fallen under $94.
Has the market grown weary of these attacks?
Many traders that I talk to say--yes. They point out that while MEND’s threats of “imminent” attacks continue, it hasn’t resulted in significant supply disruption in the several months. Militant attacks have cut into oil production in Nigeria, which is the top exporter of crude in Africa and the fifth biggest supplier of crude to the U.S., pushing it down 20 percent, since attacks began in February 2006. But most of the major supply disruptions occurred many months ago.
The reality today is that we likely will see growing instability in the Niger delta and more attacks until at least early February. However, Sebastian Spio-Garbah, an energy analyst, who specializes in the Middle East and Africa for Eurasia Group says:
"Unless the 2007 presidential election is annulled (there’s a 40 percent chance that’ll happen) and a new election is ordered, by the second quarter the situation should calm considerably."
“Apart from ‘headline risk’ and a few tens of thousands of barrels of oil offline, I don’t expect massive - 400,000 to 600,000 barrels per day-type shutoffs - as happened in 2006 and 2007,” “Once we are out of the first quarter, there is a real positive prospect of a Comprehensive Niger Delta Peace Agreement, which will gradually help to restore stability.”
In fact, Eurasia Group estimates Nigeria’s 2008 crude production will surpass the current OPEC quota of 2.2 million barrels a day.
Plus, Spio-Garbah says growing LNG exports, thanks to Gazprom’s interest and potential $2 billion investment, should aid in Nigeria’s march to become the world’s 3rd largest LNG exported by 2010.
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