Oil worries extend beyond Libya and Syria(Read article summary)
Conversations surrounding last week's oil markets centered on Libyan production issues and the possibility that U.S. military strikes on Syria may have broader implications for crude oil, Graeber writes.
Sabotage and theft from oil producing regions in Nigeria has left a black mark on the nation's economy. Oil production is down more than 7 percent this year, bringing the economy along with it. Last week, Royal Dutch Shell announced it entered into talks with Nigerian villagers who said their lives were changed for the worse because of the company's pipeline spills. While that may offer some relief for the Niger Delta, the death of at least 20 people at the hands of Islamic militants suggests it's still no place to do business.
Conversations surrounding last week's oil markets centered on Libyan production issues and the possibility that U.S. military strikes on Syria may have broader implications for crude. Brent crude oil prices for last week hovered above the $115 per barrel mark. In April, Libya was still producing around 1.4 million barrels of oil per day, long before there were any serious concerns about military action in Syria. Nigeria's Bonny Light crude oil grade, however, has been under force majeure ever since. Though Libya's near-term oil prospects are dwindling, Nigerian production isn't exactly on the rebound. (Related article: Looking for the Next Mega Oil Play)
Last month, shipping information showed Nigeria was set to export 95,000 barrels of Bonny Light per day in October, down 24 percent from what's planned for September. Crude oil output for the second quarter, meanwhile, was down more than 7 percent from the first quarter to average 2.11 million bpd. That's left Nigeria with something of a black eye. OPEC said oil provides Nigeria with 20 percent of its gross domestic product, but 95 percent of its foreign exchange earnings and more than 60 percent of its budgetary revenues. Nigeria's oil wealth is in part the reason why it's Africa's second largest economy, but its economy is slowing down. The country's National Bureau of Statistics said last week the economy grew 6.18 percent during the second quarter when compared to the same time last year. That's nearly 5.8 percent slower than the first quarter. The decline is largely due to the drop in oil output because of theft and pipeline shutdowns.
The bright spot, however, is that non-oil sector growth is increasing because of construction, agriculture and hotels and restaurants. And last week, Africa's richest man, Aliko Dangote, signed a measure to build the country's largest oil refinery, which could help reduce the country's dependence on international markets. Shell, meanwhile, said it was in talks to settle claims with members of the Bodo community who say their livelihoods were ruined by oil spills from the company's pipelines. London law firm Leigh Day said as much as 600,000 barrels of oil spilled, though Shell said about 556,000 barrels of that was because of sabotage.
Shell said part of its clean-up efforts was thwarted by local groups in the Niger Delta region. In the north, meanwhile, militants from Islamic sect Boko Haram were blamed for the machete deaths of more than a dozen people. At least 160 people were killed in violence tied to the group last month. Another five people were killed by gunmen near the capital city, Abuja.
A World Bank report from May said the macroeconomic outlook for Nigeria "looks generally strong" in the short-term. The bank said the government isn't doing a good enough in staving off "social distress," however. While Nigeria's problems pale in comparison to Libya's, it serves as a reminder that OPEC is still a 12-member cartel.