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Reuters: Oil holds at $64 as Nigeria attack worries remain

Tue Mar 28, 2006 8:39 AM GMT
By Neil Chatterjee
SINGAPORE (Reuters) – Oil prices steadied on Tuesday, weighed down by swollen U.S. crude stockpiles but held above $64 on threats of further attacks on facilities in Nigeria.
U.S. light crude for May delivery traded six cents down at $64.10 a barrel by 0320 GMT, after slipping 10 cents on Monday. London Brent crude edged 8 cents down at $63.53 a barrel.
Hopes of an end in Nigeria to three months of sabotage and kidnapping were raised by the release on Monday of three oil company hostages, but militants said their fighters would now focus on crippling oil supplies from the OPEC member.
About 26 percent of output from the world's eighth-largest exporter, or about 630,000 barrels per day, has been cut, mainly due to militant attacks.
“Looking ahead, the market shows signs of an upward bias, and will have to juggle between supply disruptions in Nigeria and a spike in (U.S.) refinery demand after the end of a spring turnaround season,” said JPMorgan.
A spokesman for Royal Dutch Shell, the biggest oil operator in Nigeria and the company most affected by the violence, declined to say when production would resume.
Prices have held between $60 and $65 for more than a month as traders balance geopolitical risks such as tension over Iran's nuclear programme with bumper U.S. fuel supplies.
U.N. Security Council powers held out on Monday for agreement this week on a statement to rein in Iran's nuclear ambitions, but a deal appeared elusive before a forthcoming ministerial meeting. Traders fear Tehran could retaliate to any potential sanctions by choking off oil supplies.
However, analysts expect U.S. crude stocks to have risen further last week, predicting a 1.8 million barrel gain in government data due on Wednesday. Analysts expect distillate and gasoline stocks to have each dropped 1.7 million barrels
High gasoline inventories will help cushion the impact of oil refineries switching away from fuel additive MTBE to ethanol, but supply disruptions are still possible this summer, according to the U.S. Energy Information Administration.
China, whose thirst has been a key driver behind surging oil prices, recorded a 4.4 percent increase in oil demand in February compared with a year earlier. That was the biggest leap since October as buyers stocked up ahead of retail fuel price hikes.

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