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Financial Times: Uncertainty still dogging price of crude

EXTRACT: Iran dismissed calls to suspend uranium enrichment on the eve of a vital meeting with the European Union, while protesters forced further disruption to oil production in Nigeria. Shell said 150,000 barrels a day of oil production had been halted after protesters stormed the Bomu pipeline complex, a major artery feeding the Bonny crude export terminal. This was the second attack in a month.

THE ARTICLE

By Chris Flood
Published: May 31 2007 03:00 | Last updated: May 31 2007 03:00

Crude prices remained choppy yesterday after a sharp fall in the previous session as traders wrestled with mixed news concerning oil supplies and ongoing geo-political concerns.

ICE July Brent fell 29 cents to $67.84 a barrel but Nymex July West Texas Intermediate rose 34 cents to $63.49 a barrel.

Market rumours included suggestions that the US government was preparing to release crude stocks from the strategic reserve if oil prices moved too high. However, officials in the Department of Energy said emergency supplies of crude would be released if a hurricane disrupted production in the Gulf of Mexico.

Meanwhile, Colonial Pipeline shut its main petrol line, which carries fuel from Gulf Coast refineries to New York, as a precaution following an integrity check. Colonial is the largest US pipeline for petrol, heating oil and diesel and no restart time has been announced.

Iran dismissed calls to suspend uranium enrichment on the eve of a vital meeting with the European Union, while protesters forced further disruption to oil production in Nigeria. Shell said 150,000 barrels a day of oil production had been halted after protesters stormed the Bomu pipeline complex, a major artery feeding the Bonny crude export terminal. This was the second attack in a month.

Nigeria’s oil production has lost around 845,000 barrels a day due to violence by militants, around one-third of its total. Output losses in Nigeria are one reason for Brent’s continuing premium over WTI.

Petrol prices weakened ahead of the latest US weekly inventories data which have been delayed until today due to Monday’s public holiday.

A poll of analysts by Reuters suggested petrol stocks were expected to have risen by 1.2m barrels last week as refineries stepped up production to meet peak summer demand. Refinery utilisation was expected to have risen by 0.7 percentage points to 91.8 per cent. Traders will also be looking to see if there is any indication that high prices have hurt demand. Crude stocks were expected to have increased by 0.7m barrels.

Nymex June RBOB gasoline fell almost 3 cents to $2.2685 a gallon. Petrol prices have fallen 5.6 cent so far this week.

Base metals came under pressure following Wednesday’s sell-off in the Chinese equity market with copper down 0.8 per cent to $7,210 a tonne in spite of a fall of 1,675 tonnes in London Metal Exchange stocks.

Lead, however, rose 2.1 per cent to $2,287.5 a tonne after hitting a new record of $2,290 earlier in the session. Analysts at Standard Bank said further gains for lead prices were possible approaching the summer – historically a period of high demand, especially from the battery industry.

Zinc fell 1.5 per cent to $3,595 a tonne. Analysts at Barclays Capital said the metal’s recent sell-off had been overdone and with LME stocks at a 16-year low (suggesting significant tightening in the market) zinc’s fundamentals could push prices to $4,000.

In Chicago, wheat prices rebounded strongly with July futures up 21 cents to $5.12 a bushel after the US Department of Agriculture revised its assessment for both winter and spring wheat crop conditions down slightly.

Wheat’s strength inspired gains for July corn, which rose 14 cents to $3.78¾ a bushel while July soyabeans added just 11 cents at $8.08½ a bushel.

Copyright The Financial Times Limited 2007

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