Nigeria crude rallies to five-year high as Gulf crisis boosts demand

Nigeria’s crude oil has surged to its highest level in nearly five years as escalating military confrontation between the United States and Iran disrupted shipping through the Strait of Hormuz, driving global oil prices sharply higher and increasing demand for Nigeria’s Atlantic Basin crude grades.

Brent crude climbed almost three per cent to trade above $90 per barrel, while Nigeria’s flagship grades, Bonny Light, Qua Iboe and Forcados, strengthened to around $93 per barrel, attracting higher premiums from European refiners seeking alternatives to Middle East supplies threatened by the conflict.

The latest rally followed fresh exchanges of attacks between the United States and Iran, with reports of commercial vessels coming under attack near the Strait of Hormuz, one of the world’s busiest oil shipping routes through which about a fifth of global crude supplies pass.

The disruption has effectively redirected buyers towards Atlantic Basin producers, placing Nigeria in a stronger position to benefit from the widening geopolitical risk premium.

The development comes as Nigeria’s crude oil production continues its strongest recovery in more than four years.

According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), crude oil output averaged 1.56 million barrels per day (bpd) in June, the highest monthly production since April 2020, while total liquids production, including condensates, reached 1.735 million bpd after four consecutive months of growth.

Production from the country’s major export terminals also remained robust, with Bonny Terminal producing about 318,000 bpd, closely followed by Forcados at approximately 306,000 bpd, supported by improved pipeline security, reduced crude theft and enhanced infrastructure stability.

Analysts said Nigeria is increasingly benefiting from its strategic location outside the Gulf shipping corridor, making its crude more attractive to refiners seeking uninterrupted supplies.

Unlike Middle East exports that must pass through the Strait of Hormuz, Nigerian crude is shipped directly through the Atlantic, significantly reducing geopolitical shipping risks.

The improved market conditions have also strengthened domestic crude demand following the expansion of the Dangote Petroleum Refinery.

Industry data showed the refinery lifted approximately 40.4 million barrels of Nigerian crude within just 60 days, sourcing grades including Bonny Light, Forcados and Bonga to sustain refining operations.

The sizeable domestic offtake has created a stronger price floor for Nigerian crude even as international buyers continue to compete aggressively for available cargoes.

The rising demand has placed regulators and producers in the delicate position of balancing domestic supply obligations with lucrative export opportunities generated by the global supply disruption.

The renewed strength in crude prices is expected to boost Nigeria’s oil export earnings, improve foreign exchange inflows and provide additional fiscal support for government revenues if the rally is sustained.

However, analysts warned that prolonged conflict in the Middle East could also increase imported inflation through higher energy costs, potentially offsetting some of the gains from stronger oil revenues.

United States Secretary of State Marco Rubio said Washington had intensified strikes on Iranian military assets used to threaten commercial shipping through the Strait of Hormuz, while Iran continued retaliatory attacks across the region.

Market observers said any further escalation capable of disrupting crude exports from the Gulf could sustain the upward momentum in oil prices, placing Nigerian crude among the biggest beneficiaries of the evolving global energy crisis.