Oil Prices Surge Amid Russia-Ukraine Tensions

Oil rose to its highest since 2014 yesterday after Moscow ordered troops into two breakaway regions in eastern Ukraine, adding to supply concerns that are pushing prices towards $100 a barrel.

Brent crude, the global benchmark, was up $1.93, or two per cent, at $97.32, having earlier reached its highest since September 2014 at $99.50.

United States’ West Texas Intermediate (WTI) crude jumped by $2.96, or 3.3 per cent, from Friday to $94.03, with the market having been closed on Monday for a public holiday. WTI also touched a seven-year high on Tuesday as it peaked at $96.

Germany put the certification of the Nord Stream 2 gas pipeline from Russia on ice while the United States (US) and European Union (EU) discussed potential sanctions as Ukraine reported continued shelling in east Ukraine.

“The potential for a rally over $100 a barrel has received an enormous boost.

“Those who have bet on such a move anticipated the escalation of the conflict, ” said Tamas Varga of oil broker PVM.

Julius Baer analyst, Norbert Rucker, added: “We see the oil market in a period of frothiness and nervousness, spiced up by geopolitical fears and emotions.

“Given the prevailing mood, oil prices may very likely climb into the triple digits in the near term.”

In the meantime, the Federal Government has declared its intention to invest and focus attention on natural gas exploitation in the country.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, stated this yesterday at the Sixth GECF Summit in Doha, Qatar, where represented President Muhammadu Buhari.

The Senior Adviser (Media & Communications) to the minister, Horatius Egua, made this known in a statement.

The aide said: “The recent enactment of the Petroleum Industry Act (PIA) is an indication of our commitment to derive more value from natural gas by providing the required governance, regulatory and fiscal framework to support the growth of the industry.”

Buhari said Nigeria, a gas province with some oil, “is committed to sustainable growth of natural gas exploitation and utilization, both for domestic use and export via LNG and pipeline gas to sub-regional African countries” stressing that “Nigeria is embarking on different initiatives, projects, and policies to enhance the performance of the oil and gas sector”.

He listed some of the gas initiatives Nigeria is currently embarking upon to include the National Gas Expansion Program (NGEP), designed to provide framework and policy support to extend gas supply and utilization in power generation, gas-based industries, and in emerging niche gas sectors such as gas in transportation LPG for cooking and remote virtual gas supply using trucks to convey LNG and CNG to industries.

The others initiatives according to the president are the Ajaokuta-Abuja-Kano gas pipeline to support 5 billion cubic feet per day of domestic gas utilization in the near term and 5-Gigawatt power generation, the expanding of the current LNG production capacity to about 30 million tons per annum at Bonny with the on-going N-LNG Train 7 project and the declaration of 2021-2030 as the Decade of Gas towards a gas-powered economy, that would not only lower Nigeria’s GHG emissions but also reduce the country’s import bills.

The President noted that with natural gas projected to be the leading fossil fuel in the energy transition, “the GECF, given its member countries vast natural gas resources and experience in the oil and gas industry, is well positioned to provide stewardship and credible platform to promote natural gas as a sustainable fuel for an effective energy transition. ..We therefore need to continue to assess the gas and energy market dynamics both in the short, medium, and long-term timeframe with the aim of taking market opportunities and collectively address the challenges.

To achieve the set objectives, he called for the “need to work together as policy makers, investors, the energy industry decision makers, researchers, and technology developers to make modern energy sources such as natural gas available and affordable to all”.

While restating Nigeria’s commitment to Conference of Parties (COP26) Glasgow declaration towards zero carbon emissions, the president however noted the importance of natural gas for effective energy transition towards a low carbon future and as a fuel for socio-economic development, taking into consideration its credentials such as abundant, flexible, cleanest fossil fuel, and its versatility.

The Ukraine crisis has added further support to an oil market that has surged on tight supplies as demand recovers from the COVID-19 pandemic.

The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, have resisted calls to boost supply more rapidly.

A senior British minister on Tuesday said that Russia’s move into Ukraine has created a situation as grave as the 1962 Cuban missile crisis, when a confrontation between the United States and Soviet Union brought the world to the brink of nuclear war.

Nigeria’s minister of state for petroleum on Tuesday stuck to the OPEC+ view that more supply was not needed, citing the prospect of more production from Iran if its nuclear deal with world powers is revived.

Talks are ongoing on renewing Iran’s nuclear agreement with world powers, which could eventually boost Iran’s oil exports by more than 1 million barrels per day.