*Saudi Arabia summons Nigeria, other OIC ministers over Crisis
*Reliance On Imported Refined Petroleum Products Dangerous For Nigeria’s Economy, Analysts
The risk of Middle East conflict escalating into full blown war, particularly with possible direct involvement of Iran, may have started showing signs with oil Prices pushing higher on Tuesday and analysts insisting that the United States could enforce sanctions.
Already, oil prices eased on Tuesday after rallying more than 4% in the previous session, with traders cautious as they watched for potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group, Hamas.
Which ever way, Africa’s largest oil exporter, Nigeria, which imports nearly all its fuel as it does not refine nearly enough to meet the demand of its 200 million citizens will further fall into deep crisis.
Despite denial by Mele Kyari, chief executive of Nigeria’s National Oil Firm, NNPC Ltd that the government had not reintroduced a decades-old petrol subsidy scrapped at the end of May, concerns from investors of a de facto return is gaining ground even as pump prices have not moved since July, despite a more than 30% rise in oil prices.
With NNPCL, again becoming the sole importer of petrol because local private firms are unable to obtain foreign currency, analysts say the endemic corruption would further spread its tentacles.
Reinforcing the fears, Saudi Arabia has called for an urgent ministerial meeting of Nigeria and other Organization of Islamic Cooperation (OIC) to discuss the escalation in Gaza.
According to reports, the meeting was summoned by the Saudi Arabia Crown Prince, Mohammed bin Salman on Tuesday, October 10, 2023.
The OIC includes a wide range of member states from different regions, including the Middle East, Africa, Central Asia, and Southeast Asia. Some prominent members include Saudi Arabia, Iran, Turkey, Indonesia, and Pakistan.
The OIC also has members from Africa like Nigeria and Senegal, as well as from the Balkans like Albania.
The OIC has renewed its condemnation of the Israeli military and its aggression against Gaza and said that it holds Israel responsible for ignoring international resolutions.
According to Reuters; “Crown Prince affirmed that the Kingdom stands by the Palestinian people to achieve their legitimate rights, realize their hopes and aspirations, and achieve just and lasting peace.”
Specifically, brent crude fell 36 cents to $87.79 a barrel by 0805 GMT, while U.S. West Texas Intermediate (WTI) crude eased 35 cents to $86.03 a barrel. Both benchmarks had fallen by more than $1 in earlier trading before recovering slightly.
Brent and WTI had surged more than $3.50 on Monday as the clashes raised fears that the conflict could spread beyond Gaza into the oil-rich region. Hamas launched the largest military assault on Israel in decades on Saturday, while fighting continued into the night on Monday as Israel retaliated with a wave of air strikes on Gaza.
“There is still plenty of uncertainty across markets following the attacks in Israel over the weekend,” said ING analysts on Tuesday, adding that oil markets are now pricing in a risk premium.
“If reports of Iran’s involvement turn out to be true, this would provide another boost to prices, as we would expect to see the U.S. enforcing oil sanctions against Iran more strictly. That would further tighten an already tight market,” the ING analysts added.
While Israel produces very little crude oil, markets worried that if the conflict escalates it could hurt Middle East supply and worsen an expected deficit for the rest of the year.
Israel’s port of Ashkelon and its oil terminal have been shut in the wake of the conflict, sources said on Monday.
Iran is complicit even though the United States has no intelligence or evidence that points to Iran’s direct participation in the attacks, a White House spokesperson said on Monday.
“If the U.S. finds evidence directly implicating Iran, then the immediate reduction in Iran’s oil exports becomes a reality,” said Vivek Dhar, an energy analyst at CBA.
“We continue to believe that Brent oil will ultimately stabilise between $90-$100/bbl in Q4 2023,” said Dhar, adding that the Palestine-Israel conflict raises the risk of Brent futures tracking at $100/bbl and above.
In a more positive sign for supply, Venezuela and the U.S. have progressed in talks that could provide sanctions relief to Caracas by allowing at least one additional foreign oil firm to take Venezuelan crude oil under some conditions.
On October 6, 2023, war broke out between Israel and Hamas, the militant Islamist group that has controlled Gaza since 2006.
Hamas fighters fired rockets into Israel and stormed southern Israeli cities and towns across the border of the Gaza strip, killing and injuring hundreds of soldiers and civilians and taking dozens of hostages.
The attack took Israel by surprise, though the state quickly mounted a deadly retaliatory operation. One day after the October 7 attack, the Israeli cabinet formally declared war against Hamas, followed by a directive from the defense minister to the Israeli Defense Forces (IDF) to carry out a “complete siege” of Gaza.
The development, again seems to be polarizing the world, likely precursor to another world war.