Nigeria set for crude oil bonanza as Israeli/Palestinian spat looks set to raise petroleum prices

NIGERIA could cash in on the ongoing heightening of tension in the Middle East as the latest spay between Israel and Palestine has raised fears of crude oil supply shortages leading to international prices rises.

Amid fears that the current situation in Israel and Gaza could disrupt output from the Middle East, the price of Brent Crude has risen $2.25 a barrel to $86.83. Nigeria's Bonny Light Crude is identical to Brent Crude and sells for the same price, so there are now fears that if the conflict escalates, there may be supply shortages.

Israel and Palestinian territories are not oil producers but the Middle Eastern region accounts for almost a third of global supply. Western nations have condemned the attacks by Palestinian militant group Hamas, which controls Gaza, on Israel, blaming its offensive for the crisis.

A Hamas spokesperson said that the group had direct backing for the move from Iran, one of the world's largest oil producers. Iran has, however, denied involvement in the assault at a UN Security Council meeting in New York but Iranian President Ebrahim Raisi has expressed support for the attack.

On Monday, Israel ordered US oil giant Chevron to pause production at the Tamar natural gas field off the country's northern coast, which is within range of rocket fire from the Gaza Strip. Israel's energy ministry, which has closed the field during previous periods of unrest, said there was enough fuel from other sources to meet Israel's energy needs.

Chevron added that Israel's largest offshore gas field, Leviathan, continues to operate as normal. Energy analyst Saul Kavonic, said that global oil prices have risen "due to the prospect of a wider conflagration that could spread to nearby major oil-producing nations such as Iran and Saudi Arabia.

Mr Kavonic said that about a fifth of global supply would be held hostage if passage through the Strait of Hormuz, a vital oil trading route is disrupted. A narrow shipping lane between Iran, Oman and the United Emirates, the Strait of Hormuz is crucial for the main oil exporters in the Middle East as lot of tankers pass through it.

Crude oil exports account for about 90% of Nigerian federal government revenue and high prices generally mean more money for the treasury. Of late, however, these gains have been offset by the cost of petrol imports brought about by the fact that Nigeria's three oil refineries are all out of action.

Plans are afoot to address this with the Dangote Refinery in the Lekki suburb of Lagos State expected to start producing 650,000 barrels of refined produce a day. repairs have also begun on the Kaduna, Port Harcourt and Warri refineries.

To cash in on the bonanza, Nigeria has not to not only get her domestic refining problems sorted out but she also has to increase her crude oil output. Historically, Nigeria has always had an Opec quota of 2.5m barrels a day but at the moment output is only about 1.67m barrels a day, brought about by dilapidated pipelines, poor infrastructure, oil theft, vandalism and blatant incompetence across the sector.