Chad and crude prices

One of the more interesting side notes in crude’s run-up to its current exorbitant levels is the extent to which the market has been influenced by incidents in countries that, in previous years, wouldn’t have possibly affected the global oil futures price.

One of those countries is Chad, which suffered an attempted coup last month and where a rebel leader Sunday threatened to attack the country’s oil fields, which are operated by a consortium led by Exxon Mobil.
Speaking to Reuters, Timane Erdimi, head of the Rally of Forces for Change (RFC), threatened to “carry the war to the south” (i.e., where the country’s oil fields are) unless President Idriss Deby opens a dialogue with the country’s rebels.

Mr. Erdimi seems to be following the lead of dissidents in Nigeria: Attack the oil, and you actually get some attention. Chad isn’t particularly well-known as a country, let alone as an oil producer, but it has been producing a pretty fair amount of sour crude from its Doba oilfields – around 160,000 to 170,000 barrels of oil a day – since 2003.
In a market where margins are extremely tight, threatening that supply grabs people’s notice. To this point, the rebels in the country haven’t targeted the oil fields, focusing instead on trying to oust Mr. Deby. Now, it appears they may well do so.

Doba crude has a high acid content, usually trading at a substantial $10-a -barrel discount to benchmarks like Brent, and is often bought up by refineries in the Far East. Even so, any substantial disruption to supply would create further concerns in an already jittery market. In a world where many likely couldn’t locate Chad on a map, the country may be worth watching closely for the next couple of months at least.

Globe and Mail