A Review of the Nigerian Energy Industry

Brent rises above $116

14 September 2012, Sweetcrude, LONDON – UK premium crude, the Brent, rose for the seventh straight session on Friday, climbing above $116 a barrel bouyed by hopes for stronger global demand for oil after the US Federal Reserve launched an aggressive programme to stimulate the economy.

Brent crude for November delivery, which took over as the front-month contract on Friday, climbed 56 cents to $116.44 a barrel after rising 94 cents the previous session. Brent, which hit a four-month peak of $117.48 on Thursday, is on track to close the week up around 2%.

US crude rose 57 cents to $98.88 a barrel after briefly hitting a four-month high of $99.14. It is set to close the week up nearly 3%.

“The Fed is looking to purchase $40 billion worth of mortgage-backed securities per month for an open ended period, so that suggests there is going to be ongoing stimulus into the economy for an indefinite time. That is the key reason oil prices hit a four month high,” said Natalie Rampono, a commodity strategist at ANZ.

The Fed’s decision to tie its third bond-buying programme directly to economic conditions was an unprecedented step that marked a big escalation in its efforts to drive US unemployment lower.

The US dollar on Friday fell to a four-month low against the euro due to the Fed action. Losses in the dollar can support dollar-denominated commodities such as oil by making them cheaper to consumers using other currencies.

Oil was also boosted by escalating anti-US protests over a film demonstrators consider blasphemous to Islam.

Protesters attacked the US embassies in Yemen and Egypt on Thursday, while the United States sent warships towards Libya, where the US ambassador was killed in related violence this week. Demonstrations have also taken place in Kuwait, Iran, Bangladesh, Tunisia, Morocco and Sudan.

“The Middle East premium is starting to be thrown into the oil price a little bit, adding about $5 to the price,” said Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm.

“A lot of the dissident parties will use the film as a means to promote more unrest. As a result of that, I see it continuing for a while.”
Central bank action, geopolitical risks and a weaker dollar have offset pressure from rising US crude stockpiles.

Crude inventories in the world’s largest economy rose an unexpected 1.99 million barrels last week, the Energy Information Administration said on Wednesday. Analysts polled by Reuters had forecast a draw of 2.6 million barrels.

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  • This indicates that Bonny Light which sells at +$2.50 attracts $118.50 per barrel. We hope that with increased revenue receipts the Nigerian government can actually embark on meaningful infrastructure rehabilitation and development projects. Unfortunately, politicians have contrived a systemic means of looting the treasury by ensuring that recurrent expenditure always outstrips capital expenditure.