Brent Premium to WTI Nears Widest in Two Months on Nigeria Cuts
January 10, 2012, 2:29 AM ESTBy Ramsey Al-Rikabi
Jan. 9 (Bloomberg) -- Brent crude’s premium to West Texas Intermediate, the U.S. benchmark contract, increased for an eighth day to the widest in almost two months as Nigerian supply disruptions boosted the European marker grade.
The difference between front-month Brent futures on the ICE Futures Europe exchange and WTI on the New York Mercantile Exchange was $12.10 a barrel as of 2:22 p.m. in Singapore from $11.50 on Jan. 6, according to data compiled by Bloomberg. That’s the widest since Nov. 15. The spread closed at a record $27.88 on Oct. 24.
While production glitches in Nigeria have supported Brent, rising U.S. stockpiles have damped the New York-traded contract. Inventories unexpectedly rose by 2.2 million barrels in the week ending Dec. 30, Department of Energy data showed. Royal Dutch Shell Plc suspended export obligations on Bonny Light crude shipments last week following leaks on a trunkline. Strikes by Nigerian oil workers scheduled today risk further cutting output from Africa’s biggest producer.
“Nigerian protests over the end of fuel subsidies have maintained bullish pressure on Brent, while an unexpected build in U.S. crude oil inventories has muted the impact on WTI,” Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania, said in a research note today. The February Brent contract will expire on Jan. 16, “thus last minute supply obligations may put upward pressure on prices,” Schork added.
Nigerian Strikes
Brent for February settlement rose 9 cents to $113.15 a barrel today, according to exchange data. WTI for delivery in the same month slid 45 cents to $101.11 a barrel.
Nigerian workers will begin a national strike today after fuel costs more than doubled, threatening to shut ports and disrupt output from Shell and Chevron Corp.
The Nigerian Labor Congress and Trade Union Congress, representing more than 8 million workers, called an indefinite strike to force President Goodluck Jonathan to reverse a decision to scrap fuel subsidies. The Petroleum and Natural Gas Senior Staff Association of Nigeria, the oil workers’ union, ordered its 24,000 members to stay away from work. Nigeria produced an average 2.2 million barrels of crude a day in December, according to data compiled by Bloomberg. Bonny Light exports averaged about 195,000 barrels a day last year.
“The latest incident once again highlights the difficult operating environment in Nigeria as a result of the increasing domestic violence in the country,” Barclays Capital wrote in a Jan. 6 report, referring to the Bonny Light disruptions.
Bonga, Imo
Shell shut oil flows of 70,000 barrels a day from the Nembe Creek Trunkline, which is connected to the Bonny export terminal, on Dec. 24 because of leaks.
The company shut its 200,000 barrel-a-day Bonga field last month after it leaked less than 40,000 barrels in the country’s worst offshore spill in more than a decade. Europe’s largest oil producer said Sept. 26 it closed 25,000 barrels a day of crude from its Imo River field on Aug. 28 because of fuel theft.
The Brent-WTI spread will average $10 a barrel in 2012, according to Deutsche Bank AG estimates in a Jan. 6 report by Adam Sieminski, the New York-based chief energy economist. It averaged $14.90 in the last quarter of 2011.
Oil prices in the U.S. and Europe became dislocated in 2011 as the loss of Libyan production, used primarily by refiners in Europe, combined with a glut of crude at WTI’s delivery point in Cushing, Oklahoma, to push Brent to a record premium.
U.S. inventories rose to 329.7 million barrels in the week ended Dec. 30, the Energy Department reported. Supplies were forecast to drop 1 million barrels, based on the median of 13 analyst estimates in a Bloomberg News survey.
--Editors: Alexander Kwiatkowski, Paul Gordon
To contact the reporter on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
