Crude oil surged, approaching $66 a barrel in New York, on concern shipments from Nigeria may be disrupted as complaints about the country's presidential election spawn more violence.
Nigeria is counting votes after the April 21 poll that observers said was marred by fraud. Militant attacks have already cut about a quarter of Nigeria's output. The country produces low-sulfur, or sweet, oil that is prized by U.S. refiners because of the high proportion of gasoline it yields. Refiners are boosting gasoline output before the summer months.
``Nigeria is the driving force in the market because there are a lot of questions about the fairness of the vote,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The Nigerian crude is sweet with a high gasoline yield, so any disruption will be very bullish for gasoline.''
Let's look at a few charts. Here's a 15 minute chart from Future Source. Notice how oil ran upwards today in a strong rally.
Here's the weekly chart from Stockcharts. Notice how oil is above the head and shoulders formation and is now consolidating above the neckline.
I would guess that a peaceful resolution to the Nigerian situation would bring the price back down for now. This action would mirror the daily action after the Britain/Iran situation. However, oil is under upward pressure still from OPEC's production cuts, decreased US inventories, the approaching summer driving season and increasing oil demand. In other words, the fundamentals are still bullish.