Oil Prices Reverse Direction, Nigeria Shutdown Looms

Early Thursday, crude oil futures traded near $103 as tensions remained high between the United States and Iran.  Furthermore, news broke that the Nigerian oil and gas union will shut down all production beginning this Sunday, to dispute fuel prices across the nation.  The Associated Press reports, “The nationwide strike has been under way since Monday and the 20,000 oil and gas union members joining on Sunday will mean a top supplier of crude to the U.S. (approximately 2.4 million barrels per day) will stop production.”

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However, oil (NYSEARCA:USO) prices quickly reversed course and headed below $99 per barrel by the end of the day.  An European Union official announced that the union will probably delay an embargo on Iranian imports by six months.  The delay will allow countries such as Italy, Greece and Spain to find alternative supplies.  According to European Commission data, those three countries alone accounted for almost 70 percent of EU imports from Iran in 2010.

  • According to the most recent Energy Information Administration report, crude inventories increased by 4.96 million barrels for the week ending January 6, 2012.  Analysts at McGraw-Hill Companies Inc. (NYSE:MHP), expected oil inventories to decrease by 1 million barrels.
  • Major oil names such as Conoco Phillips (NYSE:COP), Suncor Energy Inc. (NYSE:SU) and Exxon Mobil (NYSE:XOM) closed lower on the news.  Shares of Chevron Corp. (NYSE:CVX) received additional selling pressure and closed 2.6 percent lower.  The company cautioned that fourth quarter earnings will dip “significantly below” third quarter levels.  The oil titan cites lower margins and refinery input volumes, as well as not having an asset sale for its downstream troubles.
  • On Thursday, Chevron also said it plans to drill 380 new oil wells this year in Indonesia, for an added 11,200 barrels per day of oil production.  According to BPMigas official Lambok Hutauruk, local affiliate Chevron Pacific Indonesia will yield 350,000 bpd of oil in 2012, more than an existing company goal of 330,000 bpd.

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com