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The Independent (UK): Opec supplies may increase as oil nudges $60

The Independent (UK): Opec supplies may increase as oil nudges $60

By Philip Thornton, Economics Correspondent

21 June 2005

Oil prices broke new records on both sides of the Atlantic yesterday, prompting Opec to announce it would begin talks about a further increase in supply.

The price of crude came close to hitting the psychological $60-a-barrel mark yesterday after breaking through $59 in New York.

Analysts said fears over a shortage of supply capacity were exacerbated by an outbreak of political turmoil in Nigeria, a major oil producing nation.

In New York prices closed at a record $59.37 a barrel, up 90 cents. In London Brent futures were up 56 cents at $58.32, having hit a fresh peak of $58.58. Prices looked set to break through $60 as contracts for delivery in the final four months of the year, when cold weather boosts demand, were trading above that level.

Opec, the 11-nation producers’ cartel, which last week announced it would pump an extra 500,000 barrels per day (bpd), said it would start talks about a further increase by the end of the week. “If prices continue to increase as it is now, by the end of this week … I will start consultation with my colleagues to release the 500,000 bpd,” Sheikh Ahmad al-Fahd al-Sabah, the group’s president, told reporters in Kuwait.

Experts say prices will continue to rise because of continued strong demand combined with a long-term failure to invest in refining capacity. “No new refineries have been built since the early 1970s,” said Stuart Thomson, the chief economist at Charles Stanley Sutherlands.

The market is also being driven up by heavy demand for oil in the US, where car use is on the rise because of the summer holidays, and in China.

Yesterday’s price spike followed news on Friday that the US, Britain and Germany had closed their consulates in Lagos, Nigeria, after threats from foreign Islamic militants. The closures followed last week’s kidnapping of six Shell oil workers in Nigeria, who were released on Saturday.

Meanwhile communities from the oil-producing Niger Delta are suing to stop the flaring of natural gas. “There are growing concerns over the political situation in Nigeria,” Mr Thomson said. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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