Strike end underpins oil price stability

16 September 1994

The Nigerian oil strike is over and prices have stabilised. The benchmark Brent crude is hovering around $16 a barrel but some analysts are confident that demand pressures should push prices upwards during the fourth quarter.

The sacked leaders of Nigeria's oil unions called off the strike on 6 September. The walk-out, which began on 4 June, had been undermined by a slow drift back to work since mid-August. The impact of the strike on oil production was far less than feared at the outset which explains why the market reaction was so muted when it ended.

Output sank to 1.67 million barrels a day (b/d) in August compared to an OPEC quota share of 1.865 million b/d.

The prospect of Iraqi oil flows resuming soon through the export pipeline across Turkey are receding again, amid reports that Baghdad will not accept terms for flushing the pipeline. Analysts and traders see the start of such flows as the first step towards an eventual resumption of Iraqi oil exports which would challenge OPEC quota arrangements.

The quota has been broadly respected and August output averaged 24.76 million b/d, according to the Washington- based Petroleum Finance Company. This was only 240,000 b/d above quota.

Demand for oil is rising in response to the economic recovery in the industrialised countries. In its September bulletin, the Paris-based International Energy Agency has raised its forecast for demand in the third and fourth quarters of 1994 by 100,000 b/d. The new figures are 67.2 million b/d and 69.8 million b/d respectively.

The US Department of Energy predicts a similar growth in world demand which will average 67.55 million this year, an increase of 500,000 b/d on the figure for 1993. In 1995 demand is expected to rise by another 740,000 b/d to 68.29 million b/d as the economic recovery accelerates, according to the energy department figures.

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