Why the Nigerian Situation Should Not Affect Current Prices

[TonyM]

From a logical point of view, but the Nymex boys are seldom logical.

May 15, 2007 11:31:AM ET
By John Troland

Houston, TX - One of the reasons offered by analysts that believe prices need to move higher is the ongoing violence in Nigeria that has reduced output by as much as 800,000 bpd. For years there has been violence in the country as militants in the Niger Delta, where most of Nigeria's production is located, are trying to force the central government and multinationals to increase revenues allotted to the local population. The militants resort to everything from kidnapping oil workers and at times sabotaging pipelines that has shut down output by varying degrees. Often, the oil companies operating in the company are forced to shut down certain operations during periods when the violence escalates.
These analysts -- or "market bulls" -- are constantly engaged in producing the hype about how the world is short of oil-based energy, occasionally pointing to Nigeria's internal problems as a primary reason for higher prices. It is true that Nigerian sweet crude is a product in big demand due to significantly higher gasoline yields than more prevalent sour grades.
At Oilintel.com, we believe that there are certainly geo-political situations that can create shortages. Currently, we see little evidence that concerns over the West's standoff with Iran over its nuclear ambitions, Iraq's political instability or the Nigerian violence are significantly altering world supplies.
Most recently Nigeria has been the focus, however certain estimates regarding production do not match the hype generated almost daily. The latest estimate of Nigerian output in April is 2.15 million bpd or a little more than 100,000 bpd above the country's OPEC quota.
There are certainly problems in Nigeria, but even if it were able to maximize production, it should not be exporting those barrels. The additional barrels would put the country in violation of the OPEC agreement.
Nigeria, as a member of OPEC, has been considered a price hawk and continues to exceed its quota. Industry estimates for Nigerian production in March was 2.08 million barrels per day versus its quota of 2.045 million bpd. We noted earlier that April production was about 2.15 million bpd.
If all violence ceased today, Nigeria would have an additional 700,000 to 800,000 bpd additional crude oil available for export. And if that oil were available, you can bet Nigeria would sell it. In effect, Nigeria is a bearish factor in the overall scheme of things.

[cramerica1972]

From a logical point of view, but the Nymex boys are seldom logical.

May 15, 2007 11:31:AM ET
By John Troland

Houston, TX - One of the reasons offered by analysts that believe prices need to move higher is the ongoing violence in Nigeria that has reduced output by as much as 800,000 bpd. For years there has been violence in the country as militants in the Niger Delta, where most of Nigeria's production is located, are trying to force the central government and multinationals to increase revenues allotted to the local population. The militants resort to everything from kidnapping oil workers and at times sabotaging pipelines that has shut down output by varying degrees. Often, the oil companies operating in the company are forced to shut down certain operations during periods when the violence escalates.
These analysts -- or "market bulls" -- are constantly engaged in producing the hype about how the world is short of oil-based energy, occasionally pointing to Nigeria's internal problems as a primary reason for higher prices. It is true that Nigerian sweet crude is a product in big demand due to significantly higher gasoline yields than more prevalent sour grades.
At Oilintel.com, we believe that there are certainly geo-political situations that can create shortages. Currently, we see little evidence that concerns over the West's standoff with Iran over its nuclear ambitions, Iraq's political instability or the Nigerian violence are significantly altering world supplies.
Most recently Nigeria has been the focus, however certain estimates regarding production do not match the hype generated almost daily. The latest estimate of Nigerian output in April is 2.15 million bpd or a little more than 100,000 bpd above the country's OPEC quota.
There are certainly problems in Nigeria, but even if it were able to maximize production, it should not be exporting those barrels. The additional barrels would put the country in violation of the OPEC agreement.
Nigeria, as a member of OPEC, has been considered a price hawk and continues to exceed its quota. Industry estimates for Nigerian production in March was 2.08 million barrels per day versus its quota of 2.045 million bpd. We noted earlier that April production was about 2.15 million bpd.
If all violence ceased today, Nigeria would have an additional 700,000 to 800,000 bpd additional crude oil available for export. And if that oil were available, you can bet Nigeria would sell it. In effect, Nigeria is a bearish factor in the overall scheme of things.the sad part is:ppl have to buy gas even if it is $4/gallon b/c they have to go to work to dr,soccer practice ETC......the oil companies know this<<<we have no choice we are at the mercy of OPEC and the exxon's of the world.

[madcowdisease]

What's interesting is that it seems to be a new excuse every time. Iran, Nigeria, Katrina, Rita, now it's some horse kaka about refineries needing maintenece... EN MASSE!!!

The real issue is futures traders speculating to make a buck. Any whiff of news and they drive the price of commodities up.


One last thing, is Greenspan off his rocker? What does he mean inflation is under control. Anyone who isn't a millionaire is aware inflation is rampant. My grocery bils have doubled. My fillups at the pump have doubled. All this since essentially January or February. Inflation is up big time. All we need is for uncle Ben to be honest and this unwarranted ralley will come to a screeching hault.

[zyzzyva57]

The sad truth is this country has learned nothing from Katrina

If the politicians would stop sucking up to the corn farmers we would be building oil refineries as we sent men to the moon

These are the rough numbers regarding refineries: we have not built one since the 70's

The average for refineries is they are now operating at 89% capacity instead of the norm average of 93%

As with your car, refineries have to be taken down for work

Can you imagine what would happen if a terrorist across the road from a refinery lobbed a shoulder rocket into a refinery?

Do you realize oil companies have now to blend over 130 different blends of gas for various cities and county rather than Spring and Fall for the north and south?

We are not drilling in our Gulf as we should, nor in Alaska

When I hear people BS about ethanol I ask this: do you know anywhere around the Atlanta area selling ethanol? Do you know ethanol is inefficient? Do you know it has to be shipped and cannot be pipped? Would you like an ethanol plant next to you? Do you realize other than with nuclear energy, oil is our most efficient energy on the scale we need? Do you even know how ethanol is made?

Traders do drive up energy, no doubt, but our government has wasted valuable time selling the American public on ethanol

We wasted a mild hurricane season last year to do something, and we did! Win Iowa corn farmer votes

Two months ago, people laughed at me telling them gas was heading for $5 a gallon

Politicians and not big oil nor traders should be the focus of anger--Whoring, scumbag politicians let valuable time slip away--Yea, I am mad about this!

No doubt politicians next suggestion will be price controls--GAWD!!!!!

[BuyOnDips]

Inflation is certainly happening in the grocery store. I noticed that the Snickers fun size 10 pack is now an 8 pack for the same price at Walmart. Also Cadbury bars are now 4 ounces instead of 4.5 ounces for the same price. :)

$5.00 gas might be a bargain after Bush attacks Iran. I'm predicting the attack will happen next year on April 20th.

[cramerica1972]

Inflation is certainly happening in the grocery store. I noticed that the Snickers fun size 10 pack is now an 8 pack for the same price at Walmart. Also Cadbury bars are now 4 ounces instead of 4.5 ounces for the same price. :)

$5.00 gas might be a bargain after Bush attacks Iran. I'm predicting the attack will happen next year on April 20th.what can we do?we cant quit driving?we all have to work for a living................unless ur paris hilton.

[zyzzyva57]

Where is Bush gonna get the troops to pull us into another mess?

Driving to work is not the issue, but all this aimless driving you see that has not let up

To get the scary feel for what is happening, watch Eric Bolling on "Fast Money"

Just listen to a big time trader laugh about what is happening in energy and how you, too, can profit off it IF you have the money

Scary crap, let me tell you

The politicians have really screwed us post Katrina

We are in a mess already and we still have the hurricane season

[cramerica1972]

Where is Bush gonna get the troops to pull us into another mess?

Driving to work is not the issue, but all this aimless driving you see that has not let up

To get the scary feel for what is happening, watch Eric Bolling on "Fast Money"

Just listen to a big time trader laugh about what is happening in energy and how you, too, can profit off it IF you have the money

Scary crap, let me tell you

The politicians have really screwed us post Katrina

We are in a mess already and we still have the hurricane seasonwhat role are the speculators playing in all of this? gas just hit $3.05 here in va where i live.

[zyzzyva57]

Here is my major point:

http://www.thestreet.com/pf/markets/energy/10357833.html

[madcowdisease]

At this rate we're looking at a rate hike from the FOMC by the end of the year. The price of everything is up and up sharply over a short period of time.

[peppy]

looks like problems are happening again in that area, just recently there was a bombed oil pipeline and the gas prices went up.

[zyzzyva57]

Nigeria is simply the deus ex mechanica of the oil market

At this writing, oil prices are sliding, but rest assured those pesky Nigerian rebels will flap their wings and the trader feeding frenzy will resume

Such is the world of the Rube Goldberg economy oiled by the Chaos Theory

It is more fun watching this than 24 hour news channels worrying about Rev Wright than our crummy energy policies or Master Cramer suddenly screaming the FED policy doesn't matter after six months screaming it does

What a fun time for a cynic to be alive
:biggrin:

.

[Survivor]

The Goverment or whoever they are , need to crush the commodites market's. Investor's there have got to be the greediest bastards on earth.Period.:twisted:

[Horsefish]

Nigeria is simply the deus ex mechanica of the oil market

At this writing, oil prices are sliding, but rest assured those pesky Nigerian rebels will flap their wings and the trader feeding frenzy will resume

Such is the world of the Rube Goldberg economy oiled by the Chaos Theory

It is more fun watching this than 24 hour news channels worrying about Rev Wright than our crummy energy policies or Master Cramer suddenly screaming the FED policy doesn't matter after six months screaming it does

What a fun time for a cynic to be alive
:biggrin:

.





LOL......I have always found that being a cynic is very profitable in the stock market. There are those who exhist to simply take money from the unwary.

Having said that, Chk reported a loss after hours today. This is on the back of Exxon's bad report:............. Chesapeake Energy Corporation
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CHK 50.93, -0.77, -1.5%) reported late Thursday a first-quarter loss of $143 million, or 29 cents a share. A year ago the company posted net income of $158 million, or 33 cents a share. Excluding a $704 million one-time loss from mark-to-market oil and gas hedges, the company's adjusted net income for the quarter was $561 million, or $1.09 a share, up from $466 million, or 93 cents, a year ago. Revenue for the three months ended March 31 totaled $1.61 billion. Analysts polled by FactSet had expected the Oklahoma City, Okla.-based natural gas producer to report earnings of 92 cents a share. Analysts typically exclude one-time items. Chesapeake shares fell 1.5% ahead of the report to close at $50.93.



My guess is that the rotation out of oil and related stocks will continue tomorrow. That is until the Nigerians have another pipe line blown up.

[zyzzyva57]

I wonder about the commodities market:

I suspect the concept has always existed, because it is so sociopathic, and we know how Capitalism feasts on this; therefore, I suspect if it was illegal, then this trading would simply go underground

Too, there is a legit need for it so, for example, air lines can stabilize fuel costs

Perhaps what has screwed things up so royally (as with today's politics) is instant communication and instant chatter, so the mere fact a pesky Nigerian rebel snoring can spread chaos through the commodities market? What only a few months ago would not be noted can now be multiplied into feeding frenzies in this or that market...

Though I enjoy Cramer and "Fast Money," as I learn more about the stock market, the more I like Warren Buffet's style: don't chase the FED or commodity markets...Buy low PEG stocks with solid financials and make your money slowly with ever more money to sew this concept...

Buffet is truly a work of art I wish I had discovered in my twenties


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