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Bloomberg: Brent oil may rise to new records on Alaska shutdown

EXTRACT: Producers in Nigeria, led by Royal Dutch Shell Plc, have lost about one-third of the country’s capacity to militant attacks on pipelines and platforms.  “Shell warns that it might be possible to restart some production before next April’s presidential election,” White said. “Not precisely encouraging news.”

THE ARTICLE

006/8/9
By Will Kennedy SINGAPORE, Bloomberg

Brent oil, the price marker for two-thirds of the world’s crude, may rise to a record US$79.80 a barrel this week as BP’s Alaskan shutdown compounds global supply problems, Societe Generale said.

BP Plc, which is shutting down the U.S.’s largest oil field at Prudhoe Bay to fix corroded pipelines, could take at least weeks to restart 400,000 barrels a day of lost production, Societe Generale, France’s second-largest bank, said.

The Alaska closure, which may cause gasoline shortages in California, adds to the impact of supply cutbacks in Nigeria and refining bottlenecks worldwide, Societe Generale said yesterday. Brent oil has gained 32 percent this year in London and rose to a record US$78.64 yesterday.

“Oil’s bull run is back,” Deborah White, the Paris-based bank’s energy analyst, said in a note to clients. “Refining capacity constraints have been aggravated by unexpectedly tight supply.”

Brent for September settlement fell as much as 36 cents, or 0.5 percent, to US$77.94 a barrel in electronic trading on the ICE Futures exchange today. The North Sea grade is trading at a premium of US$1.20 to West Texas Intermediate oil futures on the New York Mercantile Exchange.

Brent has outperformed New York crude prices this year because Brent is used to set prices for African crude oil grades. Producers in Nigeria, led by Royal Dutch Shell Plc, have lost about one-third of the country’s capacity to militant attacks on pipelines and platforms.

“Shell warns that it might be possible to restart some production before next April’s presidential election,” White said. “Not precisely encouraging news.”

Nigeria produces so-called light, sweet crude oil, prized by refiners for the amount of gasoline it produces and low content of sulfur, a pollutant. Norway, Western Europe’s largest producer and a source of light, sweet crude, isn’t producing as much as expected, White said.

Output has been “severely hampered by labor strikes and maintenance dragging on longer than expected because platforms are showing their age,” Societe Generale’s report said.

A lack of global oil refining capacity has forced companies to delay maintenance, increasing the number of breakdowns, White said. An industry shortage of labor and materials has delayed the completion of new refineries, she said.

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