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How Long Will Nigeria’s Supply Disruption Help Oil Prices?

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US crude oil prices  

July WTI (West Texas Intermediate) crude oil (RYE) (VDE) (XLE) futures contracts rose 0.4% and closed at $45.8 per barrel on June 9, 2017. The global benchmark, Brent crude oil futures contracts rose 0.6% and closed at $48.15 per barrel on June 9, 2017.

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Nigeria’s crude oil production 

Crude oil prices rose on June 9, 2017, due to the supply outage in Nigeria. Rebels damaged the Trans Niger pipeline in Nigeria, which caused a leak. Militant attacks and government mismanagement damaged Nigeria’s oil infrastructure and supply outage. The supply outage is temporary and could resume once the repair work is completed. Nigeria’s crude oil production rose by 100,000 barrels per day to 1.7 million barrels per day in May 2017—compared to April 2017, according to Bloomberg. It’s at the highest level in the last 13 months.

Crude oil prices fell

Brent and the US crude oil (USO) (UCO) prices fell ~4% last week. The rise in US crude oil inventories and gasoline and distillate inventories pressured oil prices last week. Prices also fell due to the rise in production in Libya, Nigeria, and the US in May 2017. Crude oil prices have fallen 9% in the last three weeks due to bearish drivers. US crude oil prices have fallen 18.8% YTD (year-to-date).

Lower oil prices have a negative impact on oil producers like ConocoPhillips (COP), Stone Energy (SGY), and Denbury Resources (DNR). These stocks have fallen 10.6%, 7.5%, and 60.3%, respectively, YTD.

S&P 500 is near a record  

The S&P 500 (SPY) (SPX-INDEX) fell 0.1% to 2,431.7 on June 9, 2017. SPY hit an intraday high of 2,445.7 on June 9, 2017—the highest level ever.

In the next part, we’ll look at the US dollar and how it impacts crude oil prices.

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