Lloyds List: Disruption caused by militants lowers world oil supply

Feb 28, 2006
OIL supply disruptions such as those caused by Nigerian militants threaten to hurt crude demand and spot tanker rates, warns a leading New York shipbroker, writes Tony Gray.
Poten ' Partners says that successful attacks on export facilities by rebel groups have shut in at least 450,000 barrels per day from Shell's Forcados terminal in Nigeria.
And militants representing the Movement for the Emancipation of the Niger Delta have warned of more attacks that could reduce Nigeria's 2.5m bpd of exports by 30%.
Poten ' Partners says there were 1,010 reported spot tanker dirty fixtures from West Africa in 2005, dominated by suezmaxes (624) and very large crude carriers (334). Half of VLCC discharges are in the US and 44% in Asia.
North America takes the lion's share of suezmax cargoes, accounting for 51%.
Poten ' Partners says an interruption in West African crude exports affects all importers as it lowers overall supply.
In an ideal world, the broker points out, China would like replacement crude from the North Sea to meet their refinery specifications.
But North Sea producers are at capacity, making them an unlikely source of relief.
Instead, Poten ' Partners says replacement crude will mainly draw down on what little spare capacity there is in Saudi Arabia 1m-2m bpd.
The broker comments: 'On the surface, one would think that replacing West African crude with Middle Eastern crude will benefit VLCC owners, but long haul West Africa to the East is an important driver determining VLCC demand.
'Thus the shift in trade patterns will dictate the degree of gain or loss for VLCCs.
'Last week's drop in suezmax rates for West Africa-US of 70 Worldscale points indicates the degree of vulnerability of these tankers to a a supply interruption here.
'What this means is that VLCCs will pick up Arabian Gulf cargoes to compensate for losses out of West Africa.'
Last week's attack on a Saudi Arabian oil facility sent crude prices up $2 per barrel, underlining the global vulnerability to attacks on oil facilities and civil discord among suppliers .
'A major hike in crude prices from supply disruptions will adversely affect economic activity, shrink demand, and hurt spot tanker rates,' Poten ' Partners concludes.

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