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Bloomberg: Oil Rises More Than $3 on Reduced North Sea, Nigeria Output

By Mark Shenk

Feb. 8 (Bloomberg) — Crude oil rose more than $3 a barrel on forecasts for lower North Sea output in March and Royal Dutch Shell Plc’s announcement yesterday that pipeline damage would reduce Nigerian exports.

Daily shipments of Brent, Forties, Oseberg and Ekofisk crude-oil grades produced in the North Sea will drop 1.1 percent in March. Brent shipments will drop 15 percent next month. Shell said yesterday it halted 130,000 barrels a day of production in Nigeria, where output is already down a fifth because of unrest.

“Overnight we learned that North-Sea shipments will be limited for the next month and the most recent news from Nigeria has revived ongoing fears about that country’s production,” said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut.

Crude oil for March delivery rose $3.66, or 4.2 percent, to $91.77 a barrel at 12:40 a.m. on the New York Mercantile Exchange. Oil is up 3.2 percent this week. Futures have dropped 8.3 percent since reaching a record $100.09 a barrel on Jan. 3.

Prices have surged since failing to break through the Jan. 22 low of $86.11 a barrel yesterday. When prices do not drop below previous lows, technical traders see it as a sign to purchase futures.

“This is primarily technical trading,” said Adam Sieminski, an analyst with Deutsche Bank AG in New York. “Prices failed to break through yesterday, which sparked short- covering,”

Shorts are bets that prices will decline.

Tanker Loadings

Tankers are set to load 157,346 barrels a day of Brent oil in March, down from 184,552 barrels a day scheduled for February, according to the loading program of field operator Royal Dutch Shell Plc, Europe’s largest oil company. A total of 4.88 million barrels will be shipped next month, compared with 5.35 million barrels in February.

Brent crude for March settlement rose $2.05, or 2.3 percent, to $90.56 a barrel on London’s ICE Futures Europe exchange. Brent touched a record $98.50 on Jan. 3.

The Organization of Petroleum Exporting Countries may cut crude production when it meets next month, to keep the price above $80 a barrel, oil ministry officials from four of the group’s nations said.

Two of the four officials, who all asked not to be identified because such discussions are private, said if prices stay above $85 the group probably won’t change supplies at its March 5 meeting in Vienna.

OPEC’s View

“OPEC is trying to defend $80 oil,” said Daniel Flynn, a broker with Alaron Trading Corp. in Chicago. “They were pretty quiet when prices were rising but now that prices have faltered they are getting worried and antsy. I think the talk is driving prices higher.”

Shell declared force majeure on exports of its Nigerian Bonny Light crude oil for the remainder of February and March yesterday because of a failure to complete pipeline repairs in Nembe Creek. Force majeure is a legal clause that allows a company to miss contracted deliveries because of circumstances beyond its control.

“The force majeure is a much bigger deal than the market first presumed yesterday,” said Jim Ritterbusch, president of Galena, Illinois-based energy consulting firm Ritterbusch & Associates. “The amount of missing barrels may grow in coming weeks.”

Nigerian Production

Nigerian production has been slashed by about 500,000 barrels a day over the past two years because of militant attacks on facilities. Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the proportion of high-value gasoline it yields.

Crude oil may fall on speculation inventories will increase as the U.S. economy slows, reducing demand for fuels.

Twenty-five of 32 analysts surveyed by Bloomberg News, or 78 percent, said prices will decline through Feb. 15, the most bearish response since the weekly survey was introduced in April 2004. Five of the respondents, or 16 percent, said futures will be little changed and two predicted a rise.

“The principal driver of the market is still the economy,” Ritterbusch said. “The market will probably resume the move lower when we come in next week. Chances are we will continue to get negative economic data and the DOE report will show another inventory gain.”

U.S. crude-oil stockpiles rose 17.2 million barrels, or 6.1 percent, in the past four weeks, the Energy Department reported on Feb. 6.

To contact the reporter on this story: Mark Shenk in New York at [email protected] 

Last Updated: February 8, 2008 12:58 EST

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