Oil Price Drops Following Bin Laden’s Death

Daily Independent (Lagos)

Adeola Yusuf

3 May 2011

Lagos — Oil produced by Nigeria and other members of the Organization of the Petroleum Exporting Countries (OPEC) shed $0.45 at the start of the week that was marked by the killing of al-Qaeda leader Osama bin Laden, according to data issued by the group on Tuesday.

OPEC stated the fall maintaining that its basket price settled at $119.90 per barrel (159 litres) on Monday.

Bin Laden was killed by the special force of the United States, consumer of over 1 million barrels of oil from Nigeria.

Analysts however said that Laden’s death would not reduce the risk premium on oil for long, as unrest in North Africa and the Middle East would continue to support prices.

Nigeria, Africa’s biggest oil supplier depends largely on proceeds from crude to service over 80 per cent of its budget.

Oil prices fell below $113 a barrel on Tuesday as a stronger U.S. dollar made crude more expensive for investors with other currencies and markets appraised the impact of Laden’s death.

By early afternoon in Europe, benchmark crude for June delivery was down 81 cents at $112.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 41 cents to settle at $113.52 on Monday.

In London, Brent crude for June delivery was down 99 cents to $124.13 a barrel on the ICE Futures exchange.

Crude has jumped 34 percent since mid-February, a rally fuelled by disruption of oil supplies in Libya and a weaker dollar. On days when the dollar strengthens, commodities such as oil tend to fall.

The euro fell to $1.4791 on Tuesday from $1.4823 late Monday.

Traders are also mulling the impact of the death of Laden in Pakistan on Sunday.

Some are concerned about revenge attacks on U.S. targets while others estimate a weaker al-Qaida lowers the risk that terrorism will destabilize the oil-rich Middle East.

Edward Meir of MF Global in New York said Laden’s death doesn’t really alter any of the key drivers that have been pushed energy prices higher over the past few months, such as the continued tensions in the Middle East, the stalemate in Libya and the weak dollar.

Some analysts consider Laden’s death a minor issue for the oil market, and are more focused on U.S. monetary policy. Federal Reserve Chairman Ben Bernanke said last week that the U.S. would keep interest rates low for an extended period; comments that helped weaken the dollar.

“In a number of respects, Ben Bernanke is much more central to the future of oil prices than Osama bin Laden,” Cameron Hanover said in a report. “We have seen the impact a weaker U.S. dollar has had on oil prices.”

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