Under these economic conditions, you take the good news where you can get it, and one such data point occurred in Nigeria. A cease fire by Nigeria's oil rebels, the Movement for the Emancipation of the Niger Delta (MEND), went into effect on Sunday, following a meeting between Nigerian President Umaru Yar'Adua and MEND Leader Henry Okah, Bloomberg News reported.
MEND, which for about three years has launched attacks on oil production facilities, said it has started an "indefinite cease fire" along with talks to end the conflict, Bloomberg News reported. MEND's attacks are a major reason Nigeria's oil production has fallen more than 20% in a year. The group is seeking a more-just redistribution of oil wealth to residents of the Niger River delta. Nigeria is also the fifth largest oil supplier to the United States.
Oil Analysis: Although word of the indefinite truce had little impact on oil markets Monday -- oil's roughly $80 price is being bolstered more today by a weak dollar than by supply/demand fundamentals -- long-term the cease fire is good news for the U.S. and global economies. That's because long-term the world is going to need increased production from all sources, including Nigeria, to ensure an adequate oil production safety cushion and to keep the U.S. sufficiently supplied with oil.
What have may facilitated the drive to negotiate a settlement? The high $80 per barrel oil price may have played a role. Given that high price, and assuming no change in the global economy's growth track, the outlook for Nigeria's oil export revenue is bullish, and it's much easier to negotiate agreements amid abundance and an expanding pie than amid scarcity.
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