Oil risks: Look beyond Nigeria
Jun 30th 2009 10:30AM
Updated Dec 4th 2009 2:56PM
Oil has moved up the past two trading days, to a large extent because of a rebel attack on part of the Shell pipeline system in Nigeria. Bloomberg reports "the strike targeted two well clusters in the western Niger River delta." Such incidents are fairly frequent now.
The CIA World Factbook lists Nigeria as only the number 14 producer of oil in the world. If a problems there can push up the price of oil, how bad are the risks in regions that are even larger producers? Certainly a disruption in supply from a country that is a exporter than Nigeria could move crude up by a few dollars.
The most critical risks are probably in Iran, the number four producer, and Venezuela, which is number ten. The riots in Iran after the reelection of President Mahmoud Ahmadinejad have died down, but new riots have broken out over the issue of gas rationing. An attack on any of the country's production or transportation facilities would make the world's oil markets jittery.
The recent coup in Honduras is a clue about the instability of the northern part of Latin America. The president there was ousted largely over an dispute about term limits. Hugo Chavez of Venezuela has faced similar trouble in his country. Chavez's hold on his population is based to some extent on keeping his economy strong with the capital which comes in with the sales of crude. Any significant political unrest in Venezuela would cause oil prices to spike.
The risks that could cause crude to move up are moving well beyond demand from oil hungry nations like China.
Douglas A. McIntyre is an editor at 24/7 Wall St.