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Oil price soars over $50 a barrel

London Evening Standard: Oil price soars over $50 a barrel

“The rebel group accused Royal Dutch Shell, Nigeria’s largest oil producer, and Italy’s Agip of ‘collaboration with the Nigerian state in acts of genocide against our people’.”: ‘We now think that crude oil could reach $61,’ warned investment bank Morgan Stanley.

This Is Money

28 September 2004,

THE price of oil pushed past the psychologically important $50 a barrel this morning to an all-time high of $50.01 as the market stayed bullish on a slow post-Hurricane Ivan recovery in the Gulf of Mexico.

In Britain, motorists were warned to expect a 10p a gallon rise in petrol prices this week. Diesel is also expected to increase by more than 2p a gallon, say fuel retailers.

The record oil price was set in after-hours Asian trade on the New York Mercantile Exchange as continuing unrest in key producers Saudi Arabia, Iraq and Nigeria took effect.

The price of oil is up roughly 75% from a year ago. The United States has lost more than 11m barrels of oil production in the past two weeks, according to government data, with Gulf of Mexico output still down almost 500,000 barrels a day.

Today another factor will drive oil prices still higher – an announcement by rebels in Nigeria, a giant among Africa’s oil producers, that they have declared all- out war on the government there.

The Niger Delta People’s Volunteer Force also advised all foreigners to leave the delta, which pumps all of Nigeria’s 2.3m barrels per day production.

The rebel group accused Royal Dutch Shell, Nigeria’s largest oil producer, and Italy’s Agip of ‘collaboration with the Nigerian state in acts of genocide against our people’.

The rebels said they would not attack oil installations as they did not want to pollute the delta, but foreign workers would be targeted.

The delta violence has so far had a minimal effect on oil production in the world’s seventh largest exporter, but companies fear a repeat of last year’s rebellion which forced them briefly to shut down 40% of production.

‘We now think that crude oil could reach $61,’ warned investment bank Morgan Stanley. Meanwhile, Brent crude from the North Sea rose to $46.25 on the International Petroleum Exchange in London.

The result is expected to be that the cost of unleaded petrol will rise from 82p to 84p a litre (£3.72 to £3.82 a gallon).

Ray Holloway, of the Petrol Retailers’ Association, said pressure on oil supplies and on refined petrol and diesel would mean rises.

‘I think we are looking at between 1p and 2p a litre extra on unleaded by the end of the week,’ he predicted. ‘Diesel is already costing more than unleaded, but I think we can expect another 1/2p a litre.’ Holloway added: ‘The Americans are building up their stockpiles and that is driving up the price. The hurricanes aren’t helping.’

Shadow Transport Secretary Tim Yeo warned that high fuel prices would have a knock-on effect on the rest of the economy.

‘It means higher prices at the supermarket, in industry, in business and of course at the pumps,’ he said. ‘It’s a cause for concern.’

Crude prices have risen sharply over the past week after it emerged that US stockpiles had fallen at a sharper rate than expected.

The situation has been worsened by disruption in Iraq and concerns about supplies from Russia. Clashes in Saudi Arabia between government forces and suspected Al Qaeda militants also contributed to the increase.

‘All these factors create apprehension in the market and reinforce the view that we’re on a knife’s edge in terms of supply and demand,’ said Daniel Hynes, industry analyst at ANZ Bank in Melbourne.

Economists are concerned that the price rises will hit the US economic recovery by stifling spending in the run-up to Christmas.

A leading economist said the nation’s gross* domestic product will rise only 3.5% in the second half of the year – down from his earlier estimates of 4.5%.

Hilary Cook, of Barclays Stockbrokers, said the cost of crude was ‘uncomfortably high’ but added that she expected it to cool off again.

Repeated attempts by oil cartel the Organisation of Petroleum Exporting Countries (Opec*) to increase production and take the pressure off oil prices have had limited success, with demand from China and India continuing to grow.

Though global supplies have risen strongly this year they are still straining to meet the fastest growth in demand in 24 years.

This has reinforced the view among some investors that oil at around $50 is not overpriced, despite a 50% jump in crude prices since the start of the year.

The rising oil prices sent jitters through Wall Street with the Dow Jones index falling below 10,000 for the first time in more than a month.

Share prices fell 58.70, or 0.6%, to 9988.54. It was the Dow’s lowest close since August 17. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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