Key points
- Nigerian crude grades rose to a 10-day high amid escalating tensions between the United States and Iran.
- Brent crude climbed nearly 3%, trading above $90 per barrel.
- Bonny Light, Qua Iboe and Forcados traded around $93 per barrel.
- Shipping traffic through the Strait of Hormuz slowed significantly following attacks on vessels.
- European refiners increased demand for Nigerian crude because Atlantic shipping routes avoid Middle East security risks.
Main Story
Nigerian crude oil prices climbed to a 10-day high on Monday as escalating military tensions between the United States and Iran disrupted shipping through the Strait of Hormuz, increasing concerns over global oil supplies and boosting demand for Atlantic Basin crude grades.
Brent crude rose nearly three per cent to trade above $90 per barrel, while Nigeria’s premium light sweet crude grades, including Bonny Light, Qua Iboe and Forcados, traded around $93 per barrel, reflecting strong physical demand in international markets.
The rally followed reports of attacks on vessels attempting to transit the Strait of Hormuz, one of the world’s most important oil shipping routes. Shipping activity through the strategic waterway reportedly slowed to near zero on Monday after several days of heightened military exchanges between the United States and Iran.
According to shipping reports, one Marshall Islands-flagged bulk carrier emerged from the Persian Gulf with its transponder switched off while approaching the Strait, while a liquefied petroleum gas (LPG) carrier linked to Iran’s so-called “dark fleet” was also observed heading towards the route.
The latest developments come as both countries intensified military operations.
The United States Central Command (CENTCOM) said it carried out a ninth consecutive night of strikes targeting Iranian command facilities, maritime infrastructure, missile sites and drone installations in an effort to reduce Iran’s ability to attack commercial shipping in the Strait of Hormuz.
The strikes followed the killing of another U.S. service member in northern Iraq, bringing the total number of American military fatalities linked to the conflict to 17.
U.S. Secretary of State Marco Rubio said Iran continued to express interest in negotiations while simultaneously carrying out attacks in the region.
He added that the United States would continue targeting Iranian assets used to threaten commercial shipping, arguing that freedom of navigation through international waterways must be protected.
The conflict also affected neighbouring Kuwait, where Kuwait Petroleum Corporation reported significant damage to one of its oil facilities, forcing an evacuation and leaving several people injured. Two power and water facilities were also reportedly hit.
The heightened geopolitical risks have strengthened demand for Nigerian crude, with European refiners increasingly turning to Atlantic Basin supplies that avoid the security challenges associated with the Strait of Hormuz.
Industry analysts noted that Nigerian crude continues to command a strong physical premium because cargoes can be shipped directly across the Atlantic without passing through the Middle East.
Meanwhile, production data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that Nigeria’s crude oil output averaged 1.56 million barrels per day, the country’s highest production level since April 2020.
Total liquids production, including condensates, reached approximately 1.735 million barrels per day, extending four consecutive months of production growth.
Bonny Terminal remained Nigeria’s largest producing export terminal at about 318,000 barrels per day, followed closely by Forcados at approximately 306,000 barrels per day.
Industry stakeholders attributed the production increase largely to improved security around oil infrastructure, which has reduced pipeline disruptions and enabled previously shut-in fields to resume production.
On the domestic front, the expansion of the Dangote Petroleum Refinery has significantly strengthened local crude demand.
The refinery reportedly lifted about 40.4 million barrels of Nigerian crude over the past 60 days, including Bonny Light, Forcados and Bonga grades, creating a stronger domestic market for locally produced crude even as export demand remains robust.
The Issues
Escalating conflict in the Middle East threatens global oil supply chains and shipping security.
Disruptions in the Strait of Hormuz could increase crude oil prices and transportation costs worldwide.
Higher crude prices may boost Nigeria’s export earnings but could also increase inflationary pressures through higher fuel costs globally.
Balancing domestic crude supply for local refining with strong export demand remains a challenge as the Dangote Refinery expands operations.
Sustaining Nigeria’s recent production gains will depend on continued pipeline security and infrastructure stability.
What’s Being Said
U.S. Secretary of State Marco Rubio said Iran continues to signal an interest in negotiations while carrying out attacks in the region.
According to Rubio, the United States is targeting Iranian military and maritime assets used to threaten commercial shipping, insisting that Washington will continue responding as long as international shipping routes remain under threat.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported that Nigeria’s crude production averaged 1.56 million barrels per day, marking the country’s highest oil output since April 2020, supported by improved infrastructure security and increased pipeline availability.
What’s Next
Global markets will continue monitoring developments in the US-Iran conflict and security conditions in the Strait of Hormuz for any further disruptions to oil exports. Traders will also watch whether Nigerian crude continues to command premium prices as European refiners seek alternative supplies, while attention will remain on Nigeria’s ability to sustain higher production and meet rising domestic demand from the Dangote Refinery.
Bottom Line
Escalating tensions in the Middle East have lifted global crude prices and enhanced the attractiveness of Nigerian oil in international markets. While higher prices and stronger demand could improve Nigeria’s export revenues, sustaining production growth and balancing domestic refining needs with export opportunities will remain critical for the country’s oil sector.
