Oil prices hit $80 a barrel on Thursday for the first time since November 2014 just as Shell Petroleum Development Company (SPDC) declared a force majeure on the exports of Nigeria’s major crude oil, the Bonny Light.
A pipeline leak is responsible for around 250,000 barrels per day (b/d) taken off the country’s crude exports dampening the gains of the oil price spike.
Brent crude, the international benchmark against which Nigeria’s crude oil is set, briefly hit $80.18 before pulling back to trade up 57 cents at $79.67 per barrel, Reuters reported.
US West Texas Intermediate (WTI) crude futures were up 41 cents at $72.30 a barrel, also their highest since November 2014.
As of Monday, Brent was up 20 cents at 77.32 dollars a barrel, while US West Texas Intermediate rose 10 cents to 70.80 dollars.
Mohammed Barkindo, secretary general of the Organisation of the Petroleum Exporting Countries (OPEC), attributed the development to efforts by OPEC and non-OPEC countries to re-balance the market through production freeze.
He said general, global inventories of crude oil and refined products dropped sharply in recent months owing to robust demand and OPEC-led production cuts.
“We have now been implementing this decision (declaration of cooperation) for the past 17 months with visible positive outcomes that have been widely acclaimed around the world,” Barkindo had said at the 22nd Oil & Gas Uzbekistan (OGU) conference on Wednesday.
Meanwhile, a spokesman for SPDC said that the force majeure was due to disruption in production following a leak discovered on the Nembe Creek Trunk Line, located in Rivers State.
“SPDC declared force majeure on Bonny Light exports effectiveky 08.00hrs, May 17, 2018 following the shutdown of the Nembe Creek Trunk Line (NCTL) by the operator, Aiteo Eastern E&P Company Ltd,” the spokesman said.
Force majeure refers to a clause in contracts that allows both parties to walk out of the contract when an extraordinary event or circumstance beyond the control of the parties happen.
The incident came barely 24 hours after the senate passed the 2018 budget that was anchored on an oil production of 2.3 million b/d and an oil price assumption of $51 per barrel.
Cutting off 250,000 b/d of the Nigerian crude from the international market is sure to trigger a further hike in global oil prices.