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AFX News Limited/Forbes: Oil prices higher in Asian trade as Shell cuts Nigerian oil output

02.07.08, 10:35 PM ET

SINGAPORE (Thomson Financial) – World oil prices rose in Asian trade Friday after Anglo-Dutch group Shell said production in strife-torn Nigeria, Africa’s biggest crude producer, will be disrupted for two months.

A general rise in prices of commodities, including gold, platinum, soya beans and wheat also helped lift crude oil prices.

New York’s main oil futures contract, light sweet crude for delivery in March, was 57 cents higher at 88.68 dollars per barrel. The contract gained 97 cents to 88.11 dollars per barrel in late US trade on Thursday.

Brent North Sea crude for March delivery was 57 cents higher at 89.08 dollars a barrel.

‘News of production shutdowns in Nigeria offset market fears over the global economy,’ said Sucden analyst Nimit Khamar.

Energy giant Shell said Thursday it would not be able to honour all its export contracts from its southern Nigerian Bonny export terminal for the rest of February and March because of sabotage.

The company said it has not been able to repair three pipeline leaks on the Nembe Creek trunk because of ‘serious security challenges.’

It did not give figures on the expected loss in production but industry sources say it runs into thousands of barrels of crude.

Shell is Nigeria’s largest oil operator, accounting for around half of the country’s daily output of 2.6 million barrels at peak production, but unrest in the Niger Delta has slashed production by a quarter since January 2006.

Shell has declared a force majeure, which allows companies to suspend contractual obligations such as deliveries of oil and gas following unforeseen events without incurring penalties.

Tetsu Emori, a fund manager with Astmax in Tokyo, said a general rise in the prices of gold, platinum, soya beans and wheat also drove oil prices higher.

‘It is obvious that the other commodities are driving overall prices higher. Oil is not a key driver,’ he said.

Emori said continued strong demand from developing countries like China and India should offset any decline in US energy consumption if the world’s biggest economy slides into recession.

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