Nigeria’s oil futures, Brass River and Qua Iboe, recorded gains on Monday following the news that a helicopter with Iran’s president on board had crashed and both he and the country’s foreign minister died.
On Monday, Brass River, a sweet medium light crude, gained 0.70 percent to trade at $86.60 per barrel, while the Qua Iboe, a light sweet crude grade, also gained 0.70 percent to trade at $86.60 per barrel.
ExxonMobil produces Qua Iboe from numerous offshore fields and exports through the Qua Iboe Terminal. The crude is known for its high quality and low sulfur content, making it a popular choice for refiners.
Experts said the death of the Iranian president is likely to cause volatility in oil markets as investors gauge the potential impact on the country’s oil production and exports.
“From here, we expect overall market fundamentals to improve and see similar inventory draws and price action as observed last summer, with Brent oil moving $10 higher from current levels by September,” JPMorgan analysts wrote in a note late Sunday.
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Iranian President Ebrahim Raisi, a hardliner and potential successor to Supreme Leader Ayatollah Ali Khamenei, died in a helicopter crash near the Azerbaijan border, according to officials and state media.
Despite Raisi’s death, Bloomberg reports that analysts expect Iran’s oil policy to remain unchanged as Khamenei retains ultimate authority over state affairs.
Giovanni Staunovo, a commodity analyst at UBS Group AG, stated that “oil policies are likely to be unaffected,” a view shared by Alan Gelder, vice president of refining, chemicals & oil markets at consultancy Wood Mackenzie Ltd.
Ayatollah Ali Khamenei, Iran’s Supreme Leader, has already made a statement seeking to reassure the population there would be no disruptions to ongoing state affairs.
According to early reports, the crash was caused by bad weather, which made the search and rescue operation difficult.
In other news that could cause extra volatility in oil prices, Saudi Arabia’s Crown Prince postponed a visit to Japan because of his father’s health.
According to some analysts, taken together with the news of Iran’s president, this could result in a spike of uncertainty.
In Europe, another Russian energy facility was hit. The Slavyansk oil refinery, located in the Krasnodar region, was damaged after a weekend drone attack, state-run TASS reported on Monday, citing a company security official.
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Russia has reported a rise in Ukrainian attacks on its territory since its forces opened a new front in northeastern Ukraine’s Kharkiv region earlier this month.
“From here, we expect overall market fundamentals to improve and see similar inventory draws and price action as observed last summer, with Brent oil moving $10 higher from current levels by September,” JPMorgan analysts wrote in a note late Sunday.
The Organisation of the Petroleum Exporting Countries (OPEC )and allies, together known as OPEC+, are scheduled to meet on June 1.
“The market also appears increasingly numb to developments on the geopolitical front, likely due to the large amount of spare capacity OPEC is sitting on,” said Warren Patterson, head of commodities strategy at ING.
Implication for Nigeria
This development in oil markets could have significant implications for Nigeria, whose economy is heavily reliant on oil exports.
“A decline in demand could translate to lower oil prices and consequently, reduced government revenue. This could put pressure on the country’s budget and potentially lead to cuts in public services and infrastructure spending,” Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies said.
In the 2024 budget, the government has planned with the anticipation that oil will sell above $78 per barrel and Nigeria will produce at least 1.78 million barrels per day (bpd).
Other experts said rising oil prices also raise fresh concerns about the sustainability of Nigeria’s ‘secret’ bill for fuel subsidies bill.
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