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Nigerian fighting pushes oil price to record high

The Guardian: Nigerian fighting pushes oil price to record high

“”Once again the security situation in Nigeria is proving to be a real concern,” said Simon Wardell, oil analyst at World Markets Research Centre in London.”

Ashley Seager

Tuesday September 28, 2004

World oil prices set record highs of almost $50 a barrel yesterday as fears of disruption to Nigerian supplies spooked an already tight market and threatened to have a knock-on effect at garage forecourts.

The highest demand for oil in 25 years means global production is stretched to the limit, so news of fresh fighting between government troops and rebels in Nigeria’s oil-rich Delta pushed up prices.

US light crude futures rose 86 cents a barrel to $49.74, breaking the previous record of $49.40 set over a month ago. Brent crude surged 87 cents to a new high of $46.25.

World stock markets fell on concern that rising oil prices could damage the global economy. The Dow Jones industrial average dipped below 10,000.

“Once again the security situation in Nigeria is proving to be a real concern,” said Simon Wardell, oil analyst at World Markets Research Centre in London. “We expect to see prices go through $50 a barrel as a consequence of this and hurricane Ivan, as some facilities [in the Gulf of Mexico] are still damaged.”

Rebels announced the beginning of a new offensive across Nigeria’s entire southern delta region, and oil group Shell announced it was pulling some staff out of the impoverished area as a precaution.

Nigeria pushed output to 2.5m barrels per day (bpd) of crude but had to cut that by 10% because of the strain on its ageing oil infrastructure.

Oil prices fell back in late August as the Opec cartel increased production, but they have jumped in the past couple of weeks on supply disruption in the Gulf of Mexico caused by hurricane Ivan. News that Iraqi output had jumped to 2.5m bpd, its highest level since before the US-led invasion last year, did little to soothe the market. Dealers know the country’s oil infrastructure is subject to almost daily attacks and supply is unreliable.

Opec pumped 30.5m bpd this month, the highest level since 1979, but with most cartel members at maximum output, only Saudi Arabia has spare capacity. Demand from China, India and the US is easily absorbing the extra output.

Separately, Reuters reported that the IMF had raised its forecast for world economic growth this year to 5% but trimmed next year’s to 4.3% due to a slightly weaker outlook for the US and Chinese economies.

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