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The Wall Street Journal: Oil at a 10-Month High; Is $70-Plus Here to Stay?

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By DAVID BIRD
July 6, 2007; Page C3

Fresh threats of Nigerian oil supply cuts are renewing worry over nationalistic and tribal moves to control production and may put a floor under crude oil prices above $70 a barrel.

Light, sweet crude oil for August delivery on the New York Mercantile Exchange settled 40 cents higher at $71.81 a barrel, a 10-month high, as rising petroleum stockpiles in weekly government data failed to ease supply worries powering a weeklong rally.
 
Crude oil inventories jumped 3.1 million barrels last week to 354 million barrels, the highest level since mid-May 1998, the Energy Information Administration reported. Gasoline stockpiles rose 1.8 million barrels to 204.4 million barrels.

The figures were overshadowed by violence in Nigeria, including an attack on a Royal Dutch Shell PLC oil exploration rig in the Soku Field in the eastern Niger Delta, and the abduction of the 3-year-old daughter of a United Kingdom worker.

The Movement for the Emancipation of the Niger Delta, which seeks local, tribal control of oil output, has waged a 19-month campaign, attacking oil installations and abducting foreign oil workers for ransom.

The unrest in Nigeria, the fourth-biggest crude oil source for the U.S., adds to issues putting market nerves on edge and supporting oil prices which, at above $71 a barrel, are $21, or 40%, above their January lows. And, according to many analysts, they are more likely to rise than fall.

There’s little sense that the Organization of Petroleum Exporting Countries will increase the supply of oil to the market either. In recent months, OPEC has sent two clear signals: The global economy can weather high oil prices and global inventories will need to decline further before OPEC considers increasing production.

In other commodity markets:

WHEAT: Prices rose sharply on export demand as several Mideast countries tendered to buy U.S. wheat. Expectations that further export business will appear lent support. Chicago Board of Trade nearby July gained 19.5 cents to $5.91 a bushel while most-active September rose 21 cents to $6.04 a bushel.

COCOA: Futures on the New York Board of Trade set new contract and four-year highs. Most-active September cocoa rallied $54 to $2,116 after setting a new contract high of $2,129.

Write to David Bird at [email protected]

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