Nigeria Receives Another Threat From A New Militant Group

| About: The United (USO)


The NDA strikes again by blowing up another pipeline.

Nigeria now faces a new militant group called the ULM.

Nigeria's issues will persist far longer than people expect.

Previously, we received a lot of comments on how the situation in Nigeria was only going to be temporary. We guess that's not really the case anymore, as the Niger Delta Avengers (NDA) just blew up another pipeline two nights ago.

Click to enlarge

The Nigerian government hasn't updated the world regarding what the latest production figures are, but the traders we've spoken to point to the production figure being around 750k b/d. That's an additional 250k b/d drop since our last update on the situation.

We noted previously that a good portion of the production is offshore, but pipeline damages to terminals could still result in temporary supply disruptions. We just didn't think the NDA would move so fast to blow up additional pipelines. So far, the NDA has kept its promise of continuing to attack Nigeria's oil production, and nothing has stopped them yet.

Alongside the NDA, Nigeria has to face a whole new set of problems. Say hello to the Utorogun Liberation Movement (ULM). This is a new group that announced itself April of this year. In a recent threat, ULM vowed to destroy the Utorogun Gas Plant, which supplies gas to the Egbin Power Station in Lagos and has other oil mining leases.

The goal of the new group seems to be similar to the NDA. They both share the common targets of the Nigerian Petroleum Development Company (NDPC) and Western oil companies. The group is also trying to rally the people of the Niger Delta to fight for their cause. They even went as far as giving out phone numbers to text. From that piece of information, we can reasonably assume that the ULM is significantly smaller in size vs. the NDA. But the last thing the Nigerian government wants is another group trying to destroy oil-producing assets.

So where does this leave the international oil companies (IOCs)? The NDA has been true to its word that no humans have been hurt during their attacks on infrastructure assets. If the militant groups keep that promise, then we don't see a threat to any of the IOC's employees. However, the IOCs will likely start pulling out more employees to ensure that the Nigerian government does what it can to contain the situation.

Ever since the Nigerian government sent out an invitation for mediation, the NDA has completely ignored it and resumed their attacks. Any military force will likely evoke the people of the Niger Delta to come together to fight the government. Current sentiment even among the local politicians points to the potential instability of the region remaining in place for a while. This is considerably bullish for oil, as Nigeria's outages will likely last much longer than we expected.

Overall, this is a situation we continue to monitor closely. So far, there are no indications that the NDA will stop, and if the IOCs decide to pull out, then production could drop close to 0 b/d. This would really wake up the oil (NYSEARCA:USO) markets and cause prices to rise.

We hope you enjoyed our article. Be sure to click the "follow" button above to read more articles like this and our "oil market daily" articles. We also have a premium service tailored to investors looking to how we are thinking about positioning and real time trade alerts. You can view our delayed 1-month portfolio update here . We hope to see you join the HFI community.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.