Oil prices are steadily creeping back towards the $50 mark. This increase has a surprising factor behind it: the destruction of oil facilities in Nigeria by militant groups, primarily the Niger Delta Avengers. There has been widespread disruption to a number of key crude streams, including Bonny Light, Forcados, Qua Iboe, Escravos, and Brass River. Many of the oil wells and pipelines destroyed by the Niger Delta Avengers belong to Chevron (NYSE: CVX), and will take months to repair. Nigeria has had approximately one million barrels of oil of its daily production sabotaged due to infrastructure damage-its oil production has fallen to 1.4 million barrels per day, its lowest production rate since the late 1980's. The attacks have led to Nigeria losing its place as Africa's largest oil producer (the title now belongs to Angola), and are simultaneously chipping away at the oil surplus that had crude priced at twenty-six dollars a barrel in February.
The Niger Delta Avengers have refused to engage in negotiations with the Nigeria government, and are threatening to cut the country's oil production to zero (although they do not currently have the resources to do so). The militant group is furious over their loss of land in the Niger Delta, which is the country' largest oil-producing region. They are demanding that the revenue from the Delta be redistributed more fairly among the area's communities. Oil generates eighty percent of government revenue, very little of which is seen by the region's inhabitants. The pollution that oil production causes has also ruined local farmlands and fishing grounds. The Niger Delta Avengers participated in a similar form of protest for three years beginning in 2006, which was resolved when the Nigerian government offered them amnesty, cash payments and job training. However the Nigerian government cut funding for these programs earlier this year, igniting renewed outrage. As the group is refusing to negotiate with the government, there will presumably be many more acts of sabotage against the country's oil infrastructure. If there is no ceasefire, output could remain low for years to come-a scenario that occurred in Libya in 2013, when its civil war destroyed much of its OPEC oil capabilities. Today, three years later, Libya is still suffering from outages that add up to approximately one million barrels per day.
A day after the Nigerian government commanded the military to halt its attacks and urged the militants to halt their bombings in the hope of promoting a dialogue, militants destroyed another Chevron oil well on June 8th. Last month, the company was forced to cease operations at its Escravos export terminal, which generates 160,000 barrels daily. Chevron has not commented on the assaults, nor is it the only company under attack: Shell (NYSE: RDS.A) and Agip have also suffered losses. The Nigerian government's insufficient military force, an adversary unwilling to negotiate, and the fact that activists and community leaders have largely sided with the militants do not bode well for the country's oil production-the continuing turmoil in Nigeria will likely go on to further drive up the price of oil internationally.