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Gulf-Times (Qatar): Oil drops as output from Nigeria seen, petrol data awaited

Published: Wednesday, 18 April, 2007, 08:32 AM Doha Time
 
NEW YORK: Oil fell yesterday, extending Monday’s losses as a major Nigerian oil field was expected to restart soon after being closed for more than a year.

But losses were limited by expectations that US government data today would to show a tenth straight weekly fall in gasoline stocks ahead of the summer.

US crude oil futures settled down 51¢ at $63.10 per barrel. Brent crude futures in London, which are more closely tied to oil flows from West Africa, were off $1.32 at $65.93.

Traders said yesterday the Forcados oilfield in Nigeria operated by Royal Dutch Shell could export up to 5mn barrels of oil in June. Shell officials had no comment on the reopening.

The 380,000 barrels per day field has been shut since February 2006, when militants bombed the field’s export terminal as part of a campaign to wrest more control over Nigeria’s oil revenues from the central government.

“Brent is closing the spread with WTI and the potential for Forcados production coming back probably has a lot to do with that,” said Mike Fitzpatrick, vice president, Fimat USA energy risk management.

WTI has traded at a large discount to Brent in recent weeks amid a glut in crude in the Midwestern US caused by extensive refinery maintenance and pipeline bottlenecks and shortfalls in Nigerian oil production.

However, with US refineries returning to normal operations after completing seasonal maintenance shutdowns, demand for crude oil is expected to rise, which should mop up some of the excess supplies.

“With the restart of the McKee refinery and increasing runs in general, demand for crude is back on the rise,” said Tom Bentz, analyst at BNP Paribas Commodity Futures.

The spread between WTI and Brent futures, which had been as wide at $7 per barrel earlier this month, narrowed to $1.47 per barrel for June futures on Tuesday.
The spread continued to narrow despite the announcement by Enbridge that it would restart the part of a 450,000 bpd crude oil pipeline between Canada and refineries in the US Midwest by Wednesday.

Enbridge’s Line 3 had been partially closed since Sunday evening when a leak was detected in a rural area.

Strong demand for gasoline in the US continues to support prices, following nine straight weeks of declines in gasoline inventories there.

Analysts polled by Reuters expect US government data to be released today to show that gasolines stockpiles fell again last week by 2.1mn barrels.

“The extremely strong US demand for gasoline is likely to drive down gasoline inventories again,” said Jason Schenker, economist at Wachovia Corp in Charlotte, North Carolina.

Traders are still keeping a close eye on Nigeria, the world’s eighth-largest exporter, for fear that violence over elections could further disrupt oil output, which has already been cut by one-fifth for more than a year.

Adding to uncertainty, the Supreme Court cleared a last minute bid for the presidency by Vice President Atiku Abubakar, standing against the ruling party’s candidate.

Meanwhile, noting the drop in oil inventories, Opec had said on Monday it was maintaining its forecast for growth of world oil demand in 2007 at 1.5%.

The market was also tracking an energy summit being held by South American presidents that was to discuss topics ranging from pipelines and, refineries to a gas grouping.

The two-day summit that began yesterday on Margarita island is expected to focus on big-ticket regional projects promoted by Venezuela, the only Latin American member of Opec. – AFP

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