Nigerian Oil Workers' Strike Disrupts Global Oil Markets

Strategic Insights -

The ongoing strike by Nigerian oil workers is severely impacting the country's oil exports, causing delays in loading tankers and resulting in a significant drop in oil prices on the world's markets. The disruption has led to a surge in prices of unleaded regular gasoline, heating oil, and natural gas futures. In the United States, refiners have reduced gasoline production, and American civil rights leader Jesse Jackson has arrived in Nigeria as a representative of President Clinton to address the ongoing pro-democracy strike.

Key Takeaways:

  • The strike has caused delays of four to five days in loading tankers at Bonny and Forcados, two of Nigeria's largest export terminals.
  • Nigerian oil prices have dropped due to buyers' reluctance to commit to shipments that may be slowed by the work strike.
  • The Royal Dutch/Shell Group, operator of about half of Nigeria's 1.95 million b/d output, has declared force majeure on exports from Bonny and Forcados terminals.
  • Refiners in the United States have reduced gasoline production by 290,000 b/d to 7.179 million b/d, as reported by the American Petroleum Institute (API).
  • The yield of gasoline per barrel of crude processed fell below 50% in the United States.
  • Gasoline stocks were drawn down by 663,000 bbl last week, and now stand 2.9 million bbl lower than a year ago.
  • The latest report on refined products deliveries by the Energy Information Administration (EIA) shows that gasoline demand fell 0.1% from a year earlier in the latest four weeks.
  • August No. 2 heating oil futures rose 0.40* to 50.39*/gallon, while wholesale No. 2 slipped 0.02* to 53.44*/gallon.

Statistics:

  • Buffer stock drawdown: 663,000 bbl
  • Current US gasoline production: 7.179 million b/d
  • Reduction in gasoline production: 290,000 b/d
  • Yield of gasoline per barrel of crude processed: Below 50%
  • August No. 2 heating oil futures: 50.39*/gallon
  • Wholesale No. 2: 53.44*/gallon
  • West Texas Intermediate (WTI) crude oil futures for September delivery: $19.46/bbl
  • Leading buyers of domestic crudes cut postings 25*/bbl, putting WTI at $17.75
  • 3-2-1 "crack spread": $3.81

Sources:

  • The Oil Daily, in cooperation with Computer Petroleum Corp.
  • American Petroleum Institute (API)
  • Energy Information Administration (EIA)
  • New York Mercantile Exchange
  • International Petroleum Exchange