Inside, confidential and off the record
Oil prices down, Nigeria 680.000 bpd
President Muhammadu Buhari and
Dr. Ibe Kachikwu new Minister of State for Petroleum Resources
CRUDE OIL PRICES HAVE FALLEN QUITE SHARPLY as support levels that might have been extant in Brent and WTI crude futures have proven wholly ephemeral in nature, with “product” prices leading the way lower and likely pointing to lower prices still.
Crude came under pressure... as did most commodity prices... following comments by
Mr. Kuroda, the Governor of the Bank of Japan; however when it became clear that the situation in Nigeria was becoming better rather than worse, what support might have been engendered and hoped for evaporated.
The only possibly bullish “fundamental” to draw upon was that with prices falling as precipitously as they did the term structure seemed barely to follow; that is, we would normally expect to see the one year contangos widen by
10-15 cents/barrel when prices of nearby crude futures fall by more than $1.50/barrel. Instead, the averaged front month one year contango has widened by a scant 1 cent/barrel, rising from $5.06 yesterday to $15.07 this morning. However, this is 20 cents/barrel wider than where it was one week ago this morning as front month WTI has fallen $1.50/barrel in over that same time frame, so the relationship has held over the week, but not over a single day. Crude is continuing to “bid for storage:”
Sep WTI down 160 44.40-45
Oct WTI down 169 45.10-15
Nov WTI down 161 45.83-88
Dec WTI down 161 46.54-59
Sep Brent down 147 46.00-05
Oct Brent down 154 46.42-47
Nov Brent down 157 46.79-84
Dec Brent down 160 47.33-38
OPEC Basket: $42.93 07/21
Regarding our comments above concerning Nigeria, the government in Abuja and t he Niger Delta Avengers, the militant group that has been attacking oil pipelines in the Niger Delta region, agreed to pursue a dialogue to end the violence there which has reduced Nigeria's daily oil production to 680,000 barrels per day. The meeting was held at the Governor's Office in Asaba, Delta State between Nigeria's new Minister of State for Petroleum Resources, Mr. Emmanuel Ibe Kachikwu, and representatives of Niger Delta Avengers and other militant groups. We are so mewhat surprised by the Avenger's decision to take part in such talks for they've been wholly unwilling to do so in the past, seemingly intent upon disrupting governance in the region and moving toward eventual separat ion from the rest of the country.
For those who do not know Dr. Ibe Kachikwu, we have been inordinately impressed with him and have given President Buhari very real credit for naming him to that post. Dr. Ibe Kachikwu has an LLM degree from Harvard with Distinction along with a Ph.D. and graduated first in his class in 1980 with specialization in Energy, Petroleum Law and Investment. He is also a native of Delta State in Southeastern Nigeria and is an Igbo speaker, so he has a far greater chance of dealing with the people of the
region than have other Energy Ministers. Perhaps it is for that reason that the Avengers have chosen to open talks with Abuja.
Dennis Gartman / The Gartman / June 22, 2016
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