Bonny Light nears $95 as Strait of Hormuz tensions keep oil markets on edge

The Nigerian crude contract Bonny Light neared the $95 per barrel threshold as market anxiety surged due to ongoing Middle Eastern geopolitical tensions and key trade corridors such as the Strait of Hormuz. Brent crude prices surged 6.5%, while European gas prices climbed nearly 9%. Ongoing instability in the Middle East continues to impact energy costs, although a possible deal between Iran and Oman on transit regulations for the Strait of Hormuz is nearing completion.

Nevertheless, significant challenges remain. Nigerian crude oil is generally priced relative to dated Brent, with many varieties being light and sweet, including Bonny Light, Forcados, and Escravos. Recent trading exhibited volatility, with prices soaring from the $80s low to the mid-$90s per barrel. However, macroeconomic demand factors, mostly tied to China and the ongoing global stock adjustments, are anticipated to curb overall price surges despite potential supply disruptions from geopolitical risks.

Nigerian crudes with lower sulfur content remain highly sought after in Asia and Europe. These crudes have outperformed other light sweet crude sources that have become more prevalent from the Americas. Nigerian crude production averaged between 1.505 million and 1.546 million barrels per day last month, representing a decline of about 2.3% to 4% from the prior month and marking a break from consecutive growth.

This decline was primarily due to technical and operational issues, particularly severe production drops at ExxonMobil’s Erha and Akpo fields. Despite this, Nigeria sustained output levels near its OPEC quota of 1.5 million barrels per day, suggesting relatively consistent output given its history of underproduction. Including condensate production of around 170,000 barrels per day, total hydrocarbon output would be approximately 1.67 million barrels per day.