International Herald Tribune: Crude oil prices rise on Nigeria strike, worry over Iran

The Associated Press
Published: May 25, 2007

LONDON: Crude oil prices rose Friday amid worries about supply after Nigeria’s powerful oil unions went on strike and gunmen kidnapped six oil workers in the nation’s south. Concern about more tensions with Iran was also a factor.

Potential conflicts in Nigeria — Africa’s biggest oil producer and a top supplier of crude to the United States — and Iran could affect global supplies and are buoying prices after a sharp drop-off Thursday, analysts said.

Light, sweet crude for July delivery rose 65 cents to US$64.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Brent crude for July rose 37 cents to US$71.09 a barrel on the ICE Futures exchange in London.

Oil unions began a strike Thursday at Nigeria’s state-owned oil company and threatened to target exports in hopes of reversing the sale of government refineries. The state oil company holds the majority stake in joint ventures with international oil companies that account for more than 90 percent of the country’s oil exports.

The kidnappings in southern Bayelsa, meanwhile, are the latest in a run of more than 100 seizures of foreign workers this year in the oil-producing Niger Delta.

Iran has expanded its uranium enrichment program, and the U.S. Navy is holding unannounced exercises off Iran’s coast

Traders and analysts fear any conflict between the U.S. and Iran could result in the closure of the Strait of Hormuz, through which tankers ship carry about 17 million barrels of crude oil a day, according to the U.S. Energy Information Administration.

Still, growing crude stocks in the U.S. have been depressing prices, as traders figure that already abundant crude inventories are likely to swell even more if refineries keep paring back operations for maintenance.

“The refinery problems in the U.S. has meant that there has been a buildup of crude even though there has been very strong demand for gasoline,” said Andrew Harrington, an analyst with ANZ Global Natural Resources in Sydney. “So that’s putting pressure on crude prices.”

But issues surrounding Nigeria and Iran have taken front seat for now, Harrington said.

New refinery outages were reported at Valero Energy Corp.’s McKee refinery in Sunray, Texas, and ConocoPhillips’ Alliance oil refinery in Belle Chasse, Louisiana, after a U.S. government report showed Wednesday that U.S. crude oil supplies rose 2 million barrels last week when analysts had been expecting a drop of 200,000 barrels.

“Each new refinery problem makes crude oil less needed and gasoline in tighter supply,” said Peter Beutel, president at trading advisory firm Cameron Hanover.

Heating oil futures gained 1.59 cents to US$1.9450 a gallon (3.8 liters) while natural gas prices gained 2.9 cents to US$7.710 per 1,000 cubic feet.

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