The rising political tension in Nigeria in addition to other geopolitical tension across the world could be the catalyst for $100 per barrel of crude oil to arrive sooner than ever projected. The upcoming elections give cause for concern which could result in pockets of violence, enough to disrupt operations.
The volatile campaign season ahead of upcoming elections is drawing up more tensions. The suspension of the Chief Justice of Nigeria, Justice Walter Samuel Nkanu Onnoghen by President Buhari have heightened tensions and has been termed the highest tension point as the elections draw closer. The action has drawn widespread criticism and ire of Nigerians. There were also coordinated responses from the US, UK and EU expressing concerned about the process and timing of the suspension of the Chief Justice of Nigeria.
NGOs and some political-support groups in Nigeria are threatening to shut down the country. There are unconfirmed reports of resumed militant attacks in the Niger Delta in addition to notices for resumed hostilities which in a way could lead to some shut-ins and vandalization of pipelines and other oil installations.
Already, deepening crisis in Venezuela might take out over 500,000 barrels a day of world oil supplies. The United States signalled it may impose sanctions on Venezuelan exports after recognising opposition leader Juan Guaido as interim president, prompting President Nicholas Maduro to cut ties with Washington.
Crude has rallied 18 percent so far in January, set for its best month since April 2016, as the Organization of Petroleum Exporting Countries (OPEC) and its allies started fresh output cuts. Brent crude oil futures were at $61.62 a barrel or 0.9 percent, above their last close while US West Texas Intermediate (WTI) crude futures were at $53.70 per barrel, up 57 cents, or 1.1 percent.
Fundamentally, however, global oil markets are still well supplied with surging output in the United States, where crude production rose by more than 2 million barrels per day (bpd) last year to a record 11.9 million bpd.
According to Wood Mackenzie’s latest price forecast, Brent will average $65 per barrel in 2019 and $68 per barrel in 2020. Earlier this month, analysts at Fitch Solutions Macro Research (FSMR) forecasted that the price of Brent will average $75 per barrel in 2019. FSMR analysts see the average price of Brent rising to $82 per barrel in 2020, $84 per barrel in 2021 and $85 per barrel in 2022.
Record US production would likely offset potential disruptions in Venezuela and maybe Iran and Libya. Analysts have predicted a more balanced market due to a production cut pact by the OPEC and its allies including Russia but the unfolding political tension in Nigeria could worsen the situation and fast track the journey to $100 per barrel.
FRANK UZUEGBUNAM
