Financial Times: Nigeria turmoil sparks volatile session for oil

By Chris Flood
Published: May 4 2007 03:00 | Last updated: May 4 2007 03:00

Further violence in Nigeria ensured a highly volatile session for oil prices yesterday.

Crude spiked initially on news that militants had kidnapped up to 20 foreign workers in three attacks in the Niger Delta. Prices then retreated after eight of the kidnapped workers were released safely.

Having risen as high as $66.98 in the session, ICE June Brent fell 50 cents to $65.75 a barrel while Nymex June West Texas Intermediate slipped 73 cents to $62.95 a barrel.

The events fuelled fears that further disruption to Nigeria’s oil production was likely after recent elections that were marred by allegations of vote rigging.

About one-fifth of Nigeria’s oil production – about 500,000 barrels a day – remains closed because of attacks by militants.

The insurgents said the kidnappings should serve as a warning to Shell, which is planning to restart production at its 380,000 barrels a day Forcados oilfield in June. Forcados has been shut for more than a year due to attacks by militants.

Natural gas prices moved lower after the latest US storage report matched the consensus market forecast.

Nymex June Henry Hub fell 50 cents to $7.68 per million British thermal units after inventories rose 87bn cu ft, compared to the consensus forecast for a rise of 81bn cu ft.

Base metals had a strong session. Copper jumped2.8 per cent to $8,175 a tonne, the highest level since last August, after a fall of 2,200 tonnes in LME stocks, which have shrunk to a six-month low. Traders said copper’s breakthrough resistance at $8,100 (last month’s high) had forced short covering and generated follow through buying by short-term momentum players.

Phil Roberts at Barclays Capital said the bulls would now target last July’s high of $8,210.

Bloomsbury Mineral Economics is forecasting Chinese consumption growth of 9.9 per cent this year compared to 5.2 per cent in 2006.

Global copper consumption growth is expected to slow to 3.4 per cent in 2007 from 4 per cent last year.

BME said the shortage of copper concentrates was becoming more apparent and some Chinese smelters had al-ready cut production due to shortages.

Zinc played catch-up with copper, surging 3.8 per cent to $4,101 a tonne. Strike action has started at Horsehead’s 130,000 tonnes a year Palmerton plant, the largest single producer in the US, but it remains unclear what impact the action is having on production.

Lead rose 1.5 per cent to $2,080 a tonne after hitting a record at $2,085, supported by news that lead shipments from western Australia’s Esperance port would remain suspended until at least mid-August.

Nickel increased 2.7 per cent to $49,900 a tonne with available stocks remaining critically low at 3,378 tonnes.

Further supply tightness seems likely after a week of disruption at the 50,000 tonnes a year Voisey Bay nickel mine in Canada.

Production has restarted at the mine after CVRD, the Brazilian owners, replaced striking staff. Nickel traders said the loss of a week’s output from Voisey Bay was more than one-fifth of current LME stocks.

Gold rose 1.2 per cent to $680.80 a troy ounce. Inflows to the seven leading gold Exchange Traded Fundsrose to 12.7 tonnes in April from 5.6 tonnes in March, taking inflows for the year to date to 49 tonnes, and suggesting that retail and institutional interest remains robust.

Copyright The Financial Times Limited 2007

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