While oil traders believe a potential deal between Iran and global powers could be bearish for markets as Tehran could unleash 35 million barrels of oil currently sitting in storage, Citibank believes the elections in Nigeria “seem to forebode some bullish risk in markets.”
Brent crude prices for May dropped US$1.47, or 2.6%, to US$54.82 a barrel as Iran and world powers worked toward a nuclear deal. Crude prices have declined 4.4% in the first quarter.
But a crude glut is not going to be “quickly exacerbated,” even if there is an agreement this week, Citibank analyst Edward Morse said in a note. “And if no agreement is reached the likelihood is that while some oil flows might increase, so would an array of additional sanctions that would also impact oil flows.”
A Saudi-led coalition of regional forces is also bombarding Yemen, which is seen as part of a wider proxy war between Iran and Saudi Arabia. While the fighting raises the security threat in the wider oil-producing region, most analysts believe the all-important Gulf oil infrastructure is unlikely to be affected.
While traders fixate on Iran and Yemen, it’s the hotly-contested Nigerian elections that could see as much as two million barrels of oil at immediate risk.
Incumbent president Goodluck Jonathan may be unseated by challenger Muhammadu Bukhari, and that “could spell trouble for Nigeria’s beleaguered oil industry,” according to Citibank, especially if terrorist groups like Boko Haram exploit the country’s vulnerable situation.
“A win for Jonathan could see Boko Haram attack oil infrastructure from their stronghold in the North, as they have threatened, and the President’s record of repelling the militant group is very poor while a win for Bukhari could see a resurgence of M.E.N.D. [The Movement for the Emancipation of the Niger Delta] in the large oil-producing Niger Delta region which could lead to significant disruptions of Nigeria’s two million barrels per day of oil exports,” Mr. Morse said.
Ben Curtis/AP Photo file Goodluck Jonathan (left) was defeated by opposition candidate Gen. Muhammadu Buhari in Nigeria’s presidential election
Eurasia Group is predicting a victory for Mr. Bukhari that could trigger a groundswell of protest in President Jonathan’s oil-rich stronghold of Niger Delta.
According to a Reuters tally from 34 of Nigeria’s 36 states, the 72-year-old Buhari had 14.6 million votes, testament to the faith Nigerians have put in him as a born-again democrat intent on cleaning up the country’s notoriously corrupt politics.
“The president will eventually signal acceptance of the outcome, perhaps tacitly, but may also launch an appeal at the High Court. Delta instability, should it last for several days and turn violent, poses a risk to the country’s oil sector,” Philippe de Pontet, Eurasia Group analyst wrote in a report. “Rivers state, where oil hub Port Harcourt is located, may become a particular flashpoint (regardless of who wins).”
With a file from Reuters