The price of oil climbed about 90 cents in midday trading Monday from a four-week low over worries that ongoing Nigerian strikes over a cut in gasoline price subsidies and Iranian threats to close the Strait of Hormuz would threaten supplies.
Bloomberg reported that a workers’ strike in Nigeria has entered its second week in protest against an end to a government subsidy for gasoline. President Goodluck Jonathan unilaterally reduced gasoline prices and the country’s oil minister pledged to speed up oil industry reform on Monday, lest strikes also shut down production. Other political unrest also threatens the stability of the country, which in December produced 2.2 million barrels of oil per day, accounting for nearly all its export income.
Iran, in its efforts to combat sanctions imposed over its nuclear policies, warned that a disruption of oil transport through the Strait of Hormuz would cause a shock to markets that “no country” could manage. Iranian OPEC governor Mohammad-Ali Khatibi was quoted saying, via the Iranian news agency Mehr, “No country in the world can manage the shock that results from 15 to 17 million barrels of oil not entering the market.”
Iran has also warned fellow oil-producing nations not to raise their output to compensate for its own oil. According to the Tehran-based newspaper Shargh, Khatibi warned other Arab oil suppliers not to support a possible European embargo on Iranian crude sales, characterizing such an action as “a dangerous political game.” The newspaper quoted him saying, “If oil producers bordering the Persian Gulf show the green light to replace Iran’s crude with theirs, whatever happens, they will be key players in a move to sanction Iran’s oil.”
Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who predicts crude prices will rise further, said in the report, “Supply worries in Iran and Nigeria combined with the recovering U.S. economy and demand from developing markets are driving oil prices higher. It’s only the weakness of the euro that’s stopping oil from making bigger advances.”