Connect with us

News

Oil hits $80 as Shell halts 150,000 barrels’ production

Published

on

Oil hits $80 as Shell halts 150,000 barrels’ production
  • 150,000 bopd crude exports from Nembe Line halted
  • Aiteo shuts NCTL exports pipeline over leaks

 

Shell, Nigeria’s biggest International Oil Company (IOC) in terms of asset and production, yesterday halted crude exports on a 97 kilometre, 150,000 barrels of oil per day Nembe Creek Trunk Line (NCTL) as the oil firm declared force majeure on Bonny Light crude exports, one of the major crude grades from Nigeria.

Consequently, the force majeure declared by the oil giant and concerns that Iranian exports could fall because of renewed United States (U.S.) sanctions, pushed the price of oil at the international market to $80 a barrel for the first time since November 2014.

Cargoes of oil from the Bonny Light stream, for which exports are expected to reach around 195,000 barrels per day in June, had already been delayed by a few days up to about a week.

The force majeure is a contractual term on unforeseeable circumstances that prevent someone from fulfilling a contract. A leak on the 240,000 barrels per day capacity Trans- Forcados pipeline that shut down earlier this week, also effectively cut down deliveries of Forcados, the country’s largest crude grade.

The shutdown of the Nembe Creek Trunk Line (NCTL) by the operator, Aiteo Eastern E&P Company Ltd, a spokesperson for Shell Petroleum Development Company of Nigeria Ltd (SPDC) said in a statement, led to the force majeure.

He stated that all enquiries on the cause of the leak and repair of the pipeline should be directed to the operator. “The Shell Petroleum Development Company of Nigeria Ltd (SPDC) declared force majeure on Bonny Light exports effective 08.00hrs Nigerian Time, May 17, 2018 following the shutdown of the Nembe Creek Trunk Line (NCTL) by the operator, Aiteo Eastern E&P Company Ltd,” the statement read.

Bonny Light oil is a high grade of Nigerian crude oil with high American Petroleum Institute (API) gravity (low specific gravity), produced in the Niger Delta basin and named after the prolific region around the city of Bonny.

The very low sulfur content of Bonny Light crude makes it a highly desired grade for its low corrosiveness to refinery infrastructure and the lower environmental impact of its byproducts in refinery effluent. Already, shipments of Nigeria’s Bonny Light crude, one of the country’s major sources of oil revenue, are experiencing delays in loading. Cargoes of oil from the Bonny Light stream, for which exports are expected to reach around 195,000 barrels per day in June, had been delayed by a few days up to about a week.

Meanwhile, oil prices hit $80 a barrel yesterday for the first time since November 2014. Further supporting the high prices, Reuters reported, was the news about action of Shell (RDSa.L) yesterday in Nigeria.

The company said “it was halting crude exports from a major Nigerian pipeline,” the agency reported. Concerns that Iranian exports could fall because of renewed United States (U.S.) sanctions, it was also gathered, also contributed to the price surge, as the sanction reduces supply in an already tightening market. Brent crude futures, LCOc1, reached an intraday high of $80.18 a barrel before receding to $79.67 at 1326 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 41 cents at $71.90 after also hitting their highest since November 2014, at $72.30 a barrel.

U.S. President Donald Trump’s decision this month to withdraw from an international nuclear deal with Iran and revive sanctions that could limit crude exports from OPEC’s third-largest producer has boosted oil prices.

France’s Total (TOTF. PA), last Wednesday, warned that it might abandon a multibillion-dollar gas project in Iran if it could not secure a waiver from U.S. sanctions, casting further doubt on Europeanled efforts to salvage the nuclear deal. A rapid decline in Venezuela’s crude production has further roiled markets in recent months.

“The geopolitical noise and escalation fears are here to stay,” said Norbert Rücker, head of macro and commodity research at Swiss bank, Julius Baer. “Supply concerns are top of mind after the United States left the Iran nuclear deal.”

Global inventories of crude oil and refined products dropped sharply in recent months owing to robust demand and OPEC-led production cuts. Oil stocks were expected to drop further as the peak summer driving season nears, offsetting increases in U.S. shale output, Bernstein analysts said. Several banks have in recent days raised their oil price forecasts, citing tighter supplies and strong demand. Further supporting prices, Shell (RDSa.L) yesterday said it was halting crude exports from a major Nigerian pipeline.

On the flip-side, however, high oil prices could hit consumption, the International Energy Agency warned last Wednesday as it lowered its global oil demand growth forecast for 2018 to 1.4 million barrels per day (bpd) from 1.5 million bpd.

The IEA said global oil demand would average 99.2 million bpd in 2018, although U.S. bank Goldman Sachs said consumption would cross 100 million bpd “this summer”.

Leading production increases is the United States, where crude output C-OUTT- EIA has soared by 27 percent in the last two years to a record 10.72 million bpd, putting it within reach of top producer Russia’s 11 million bpd.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Categories

Pages

Close

Trending

%d bloggers like this: