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The Economic Times: Oil steady at 66.5 dlr a barrel

SYDNEY: Oil prices were steady on Monday, after weekend elections in OPEC member Nigeria were condemned by monitors but did not appear to have worsened the disruption to the country’s oil exports.

London’s Brent crude rose a marginal 1 cent to $66.50 a barrel by 0126 GMT, pausing from Friday’s 55 cents gain, which came as investors covered short positions ahead of an election they feared could spur more violence against the oil industry.

US crude for June delivery fell 18 cents to $63.93 a barrel after rising a sharper 79 cents on Friday.

The ruling People’s Democratic Party (PDP) and its presidential candidate Umaru Yar’Adua looked set to win the poll in definitive results due later on Monday, but the main opposition party said it would not accept the poll.

Monitors reported ballot-stuffing, violence and a shortage of millions of voting papers could prompt protests.

“There were some anxieties last week over news out of Nigeria,” said Gerard Burg, an analyst at National Australia Bank. “Although the election was marked by civil disturbances, oil production has not been affected so that has allayed some fears.”

About 500,000 barrels per day of Nigerian oil output has been shut down for over a year due to attacks on oil installations and at least 50 people died in violence surrounding Nigerian state polls earlier this month.

Nigerian officials and market sources have said Royal Dutch Shell is set to resume production at its 380,000 bpd Forcados fields by the end of June.

Despite the temporary ease in prices, analysts said tight gasoline supplies in United States ahead of the summer driving season continues to linger as an upside risk.

An extended stretch of low production from US refiners has cut stocks by 13 per cent since early February, with last week’s data showing a tenth consecutive weekly decline.

Adding pressure to prompt US crude, powerful storms knocked out electrical power to Valero Energy Corp’s fire-damaged McKee refinery in Texas on Saturday, hindering operations a week after it returned from a two-month outage.

Valero began restarted units at the refinery as soon as power was restored at the 170,000 barrel per day (bpd) refinery, which had been operating at 85,000 bpd since Wednesday, a move traders expect will help drain swollen crude stocks at the Cushing, Oklahoma, delivery point for the NYMEX contract.

Analysts said Iran’s meeting with EU foreign policy chief Javier Solana on Wednesday could also potentially send prices up if negotiations took an acrimonious turn.

Iran expressed hope on Sunday that the talks with Solana would lead to a solution to its row with the West, but made clear it would not halt a nuclear fuel enrichment programme, which the West fears could produce an atomic bomb.

Iran, the world’s fourth-largest oil exporter, has been pushing forward with its nuclear programme in defiance of United Nations resolutions. The United States is concerned Tehran is seeking to build an atomic bomb instead of its stated goal of producing nuclear energy for civilian use. 

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