10 January 2012 13:31 [Source: ICIS news]
LONDON (ICIS)--The potential recovery of base oil prices in the Baltic Sea over the coming weeks could be affected by social unrest in Nigeria, a European trader said on Tuesday.
A general strike over the removal of a government fuel subsidy has entered its second day, and has paralysed the country, sparking fears of a negative impact on demand for imports.
Nigeria is a key export market for base oils produced in Russia and eastern Europe and shipped from the Baltic Sea; not only as a consumer in its own right, but also as a gateway to western Africa.
Demand from Nigeria has been strong in recent weeks, helping to stabilise Baltic Sea prices after sustained falls for over five months, between July and December, during which prices lost 28% of their value.
While Nigerian demand was by no means the sole reason for prices reaching the bottom in mid-December – base oil prices in western Europe and Black Sea also suffered similar crashes, but are much less influenced by Nigeria – the trader feels that it is a key ingredient if prices are to regain some of the lost ground.
Indeed, he believes that if current demand levels are maintained, Baltic Sea prices could begin to trend upwards in two or three weeks.
Yet this demand appears to be jeopardised by the widespread strike action and protests, which were prompted by fuel prices more than doubling overnight after the subsidy was removed on 1 January.
Protesters are reportedly also angry about government corruption and ongoing sectarian violence in the north of the country.
“At the moment, it is chaos,” said a second European trader. Trade activity is at a standstill, he added.
“I have buyers who opened COAs [contracts of affreightment] before the new year, but they now don’t care about the loading progress because they can’t receive it,” said the first trader.
He put the chances of the strikes having a significant impact on base oil prices at 50:50.
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