Chevon (CVX) is faced with nettlesome problems in Nigeria. Warfare in the country has forced the US company to pull crews from its oil fields. According to The Wall Street Journal: "almost a third of Nigeria’s pumping capacity of some 2.5 million barrels a day has been shut down."
While the problem in Nigeria could push oil up a dollar or two, it opens the debate once again if events which have little to do with demand could drive prices up, perhaps for a long period.
The problems with getting oil for the US seem to be multiplying.
It appears that as many as 300,000 barrels of oil a day cannot be accounted for in Iraq. The problem is likely due to corruption and smuggling.
Based on data collected by the US Government Accountability Office over 60% of the world’s proven oil reserves are in countries viewed as unstable.
Perhaps political issues that could cause an interruption in oil supply are already priced into per barrel costs. But, if there are two large interruptions instead of one, that may change, and change very quickly.
It is certainly not beyond the realm of imagination to think that both Venezuela and Nigeria could suffer large drops in the amount of crude that they export. Wall St. can pair up a number of other countries if it wants to create more than one "two country interruption" case.
Two disasters and $70 oil. Definitely.
Douglas A. McIntyre
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