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Nigerian violence pushes world oil prices to record

Daily Telegraph: Nigerian violence pushes world oil prices to record

“Violent clashes between soldiers and militants in Nigeria pushed the oil price to record highs yesterday as Shell airlifted out its workers.”: “Supertanker charges have risen by close to 80pc in the past two weeks, allowing owners to get four times what they need to break even.”

By Malcolm Moore, Economics Correspondent (Filed: 28/09/2004)

Violent clashes between soldiers and militants in Nigeria pushed the oil price to record highs yesterday as Shell airlifted out its workers.

During trading in London, the price of benchmark Brent crude for November delivery closed up 60 cents at $45.93 a barrel. In New York, the price of light crude was just below $50 as it gained 62 cents to $49.50.

Shell has lost around 30,000 to 40,000 barrels of oil a day from Nigeria as rebels in the Niger Delta fought soldiers. A spokesman for Shell said around 235 non-essential workers had been moved out of the area.

One rebel leader also threatened to attack the installations of Agip, the Italian oil company, accusing it of lending its helicopters to the Nigerian government to spy on the militants. Agip produces around 200,000 barrels a day in the region.

Nigerian production, which has been at surge capacity for six months, will fall back by around 250,000 barrels a day. Axel Busch, chief correspondent at Energy Intelligence, said: “When you produce at surge capacity for too long, you damage the infrastructure of the fields.”

Gun battles in Saudi Arabia between government forces and suspected al Qa’eda militants also contributed to unrest in the market, as did news that Iraqi rebels were firing mortars at the oil ministry and pipelines.

Opec, the oil cartel, has pledged to pump an extra million barrels a day from November. But president Purnomo Yusgiantoro admitted yesterday that the news failed to have any “psychological impact on the market”, since traders believe the cartel is already pumping at maximum capacity.

Analysts agreed that the price of oil was likely to pass $50 in New York this week, with another fall expected in US oil inventories. Stocks in the US are low after Hurricane Ivan closed down 10m barrels of production in the Gulf of Mexico.

Last week, hedge funds and other large speculators started betting on a rise in the oil price for the first time in five weeks, when long positions doubled to 13,500 contracts, according to the US Commodity Futures Trading Commission.

The US Strategic Petroleum Reserve has agreed to lend oil to refineries, including 1.4m barrels to Shell, but is unlikely to release oil on to the market.

“They have been very strict on the idea that they will not use it to tame the oil price but to alleviate crude shortages. Mr Cheney has said a severe shortage to the US is around 6.5m barrels a day, and we are nowhere near that,” said Mr Busch.

Meanwhile, the price of petrol is set to rise by around a penny a litre to 83p for unleaded, but this has little to do with the price of crude. Ray Holloway, of the Independent Petrol Retailers’ Association, said the blame lies with Hurricane Ivan, which has forced southern US states to buy their petrol on the European market, pushing up prices.

“At this time of year, the demand for petrol is falling away and the price is being driven by the US,” he said.

Supertanker charges soar

Supertanker charges have risen by close to 80pc in the past two weeks, allowing owners to get four times what they need to break even.

The prices have been driven up to about $6m for a 2m-barrel cargo between the Persian Gulf and Europe, or the US, due to strong demand for crude from US refineries in the wake of Hurricane Ivan.

“Refiners have decided to buy first and ask questions later, sending demand for tonnage through the roof,” said PF Bassoe, a Norwegian shipbroker.

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