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Bloomberg: Crude Oil Declines After Reports a Protest Ended in Nigeria

By Grant Smith and Eduard Gismatullin

May 16 (Bloomberg) — Crude oil fell amid reports that protesters in Nigeria plan to end their occupation of a facility run by Royal Dutch Shell Plc.

The protesters will let Shell re-open the facility and restore lost production amounting to 170,000 barrels a day, the Reuters news agency reported. Shell’s Nigerian venture, which will delay cargoes this month and next because of the incident, has lost about 500,000 barrels a day since last year because of rebel attacks.

“We have left the place out of respect for our elders and chiefs,” said Teddy Penedibebari, a leader of the protest, according to Reuters.

Crude oil for June delivery fell 32 cents to $62.85 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 1:23 p.m. in London. The contract rose 71 cents, or 1.1 percent, to $63.17 yesterday, the highest close since May 3, and the biggest one-day gain in two weeks.

“The hitch in Nigeria supplies, U.S. refinery trouble and demand from the summer driving season have led to higher prices,” said Chikako Inoue, an analyst at futures broker Taiheiyo Bussan in Tokyo. “With further geopolitical risk, oil could go up to $70.”

Brent crude for June settlement declined 8 cents to $68.03 a barrel at 1:24 p.m. on the ICE Futures exchange in London. The contract expires today. The more active July future was at $68.64 a barrel, up 22 cents. Brent is used as a benchmark to price two- thirds of global supplies, including Nigeria’s blends.

Nigeria is the sixth-largest oil producer in the Organization of Petroleum Exporting Countries, accounting for 11 percent of U.S. imports in February, according to Energy Department data. Nigeria’s low-sulfur oil is prized by refiners because of the proportion of gasoline it yields.

More Gasoline

U.S. gasoline stockpiles probably grew by 1 million barrels in the week ended May 11, according to the median estimate of 15 analysts surveyed by Bloomberg News before the Energy Department releases its weekly inventory report today. Supplies rose 372,000 barrels in the week ended May 4, the first gain in 13 weeks.

Even so, they reached only 193.5 million barrels, 8 percent less than the five-year average for the period. Supplies had fallen 15 percent in three months as refinery fires and breakdowns hampered efforts to increase production before the annual peak in demand from June through August.

If today’s “numbers fail to impress, then we will in all likelihood see real record gasoline price within the next two weeks,” Stephen Schork, the president of Schork Group Inc. of Villanova, Pennsylvania, said in a report. “Bottom line, by this point in the season nationwide gasoline inventories should be building.”

Gasoline for June delivery on the New York Mercantile Exchange was trading for $2.22834 a gallon, down 1.82 cents. Prices have risen 44 percent this year.

Rising Prices

U.S. pump prices for regular gasoline rose 1.4 cents to a record $3.087 a gallon on May 14, the American Automobile Association said. It’s up about 32 percent this year, beating the Sept. 5, 2005, high set when Hurricane Katrina hit U.S. refineries.

The U.S. Department of Energy report today will probably show U.S. oil stockpiles were unchanged last week at a 10-month high, according to the Bloomberg survey. Refineries operated at 89.8 percent of capacity, up 0.8 percentage point from the week before.

Oil inventories in the U.S., the world’s largest consumer, held 341.2 million barrels on May 4, 6.4 percent more than the five-year average for the period, the Energy Department said last week.

The inventory report will be released at 10:30 a.m. in Washington.

Expressed in U.S. dollars, West Texas Intermediate, the New York-traded benchmark, has fallen about 9 percent in the past 12 months. Oil has dropped 14 percent in euros, 14 percent in British pounds and 1 percent in yen.

Higher Forecast

Merrill Lynch & Co. today raised its price estimates for crude oil this year on expectation of lower supplies from producers outside the Organization of Petroleum Exporting Countries.

The bank raised its forecast for West Texas Intermediate to $66 a barrel in the third quarter, up from an earlier $60.50. WTI will average $67.50 a barrel in the fourth quarter this year, up from $61.50, Merrill said today in an e-mailed note.

Brent will average $65 a barrel this year, up from the bank’s earlier forecast of $60, Merrill forecast. Merrill also raised its forecast for Brent in 2008 to $66 a barrel, up from $62 a barrel.

To contact the reporter on this story: Grant Smith in London at [email protected] Eduard Gismatullin in London at [email protected]

Last Updated: May 16, 2007 08:34 EDT

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