Oil gains as Exxon declares force majeure on Nigerian exports

Oil has traded between about US$44 and US$51 (RM173 and RM201) a barrel in the past month after almost doubling since February amid a spate of supply disruptions including the attacks in Nigeria. — Reuters pic
Oil has traded between about US$44 and US$51 (RM173 and RM201) a barrel in the past month after almost doubling since February amid a spate of supply disruptions including the attacks in Nigeria. — Reuters pic

LONDON, July 15 — Oil rose as Exxon Mobil Corp declared force majeure on shipments of Nigeria’s biggest crude export grade.

Futures rose as much as 0.5 per cent in New York, reversing an earlier decline of 1.4 per cent. Force majeure — a legal clause that allows it to stop shipments without breaching contracts — was declared on Qua Iboe crude after “a system anomaly observed during a routine check of its loading facility,” Exxon said in an e-mailed statement today. This follows a similar disruption in May and June. The Niger Delta Avengers, a militant group that has targeted oil installations in Nigeria this year, claimed earlier this week that they attacked the Qua Iboe crude pipeline.

Oil has traded between about US$44 and US$51 (RM173 and RM201) a barrel in the past month after almost doubling since February amid a spate of supply disruptions including the attacks in Nigeria. While there’s still a consensus that the worst of the oil glut that sent prices to a 12-year low is over, the International Energy Agency cautioned this week that “the road ahead is far from smooth” amid seasonal weakness in demand and the return of some halted supply.

“The situation in Nigeria and the vulnerability of supply there is well known to the market,” Harry Tchilinguirian, head of commodities research at BNP Paribas SA in London, said by e-mail. “Indeed, there are many factors playing against each other in the market.”

West Texas Intermediate crude for August delivery was at US$46.15 a barrel on the New York Mercantile Exchange, up 47 cents, or 1 per cent, at 1.41pm London time. The grade rose 93 cents to settle at US$45.68 yesterday. Total volume traded was about 1 per cent below the 100-day average.

Brent for September settlement increased 49 cents to US$47.86 a barrel on the London-based ICE Futures Europe exchange. The contract increased US$1.11 to US$47.37 yesterday. The global benchmark crude traded at a 98-cent premium to WTI for September delivery.

Also helping oil higher is data showing China processed a record amount of crude on a daily basis in the first half of 2016 as privately held plants boosted operations after getting import licenses. The country’s domestic oil production dropped 4.6 per cent to 101.59 million metric tons in the period, the lowest for that period since 2012, according to data from the National Bureau of Statistics today.

The world’s second-biggest economy’s gross domestic product rose 6.7 per cent in the second quarter from a year earlier, compared with 6.6 per cent seen by economists Bloomberg surveyed.

Analysts from BNP Paribas SA to JBC Energy GmbH warned prices may sink toward US$40, due in part to seasonal demand weakness. Crude fundamentals are weaker than many realise, according to Julius Walker, senior consultant at JBC Energy in Vienna.

US inventories are brimming after two years of surplus production and demand for gasoline — the key driver of prices in summer — is proving to be disappointing. Stockpiles of the fuel rose 1.21 million barrels last week and refiners reduced operating rates by 0.2 percentage points to 92.3 per cent of capacity, according to the Energy Information Administration.

Oil-market news:

CNOOC Ltd decided this week to idle part of its Long Lake oil-sands operation in Alberta. The move comes after five years of problems cemented the site’s reputation as one of the most troubled projects in the region.

US oil explorers are yet to fully reap all the rewards of horizontal drilling techniques that helped trigger the shale boom, research firm IHS Markit Energy said.

A large number of new ships entering the market combined with a deepening contango has made floating storage relatively attractive for some companies, JBC Energy said in research note. — Bloomberg