Oil hits 117 dollars on talk of Nigeria pipeline attack

AFP: Oil hits 117 dollars on talk of Nigeria pipeline attack

April 18, 2008

NEW YORK (AFP) — Oil prices rebounded to a new record high of 117 dollars a barrel here Friday as traders refocused on supply fears after talk of a pipeline attack in Nigeria, Africa’s largest oil producer.

New York’s main oil futures contract, light sweet crude for delivery in May, surged 1.83 dollars higher to a record close of 116.69 dollars. It had hit an intraday all-time peak of 117 dollars around 1850 GMT.

In London, Brent North Sea crude for June struck a record intraday high of 114.22 dollars before easing back to settle at a record 113.92 dollars, a gain of 1.49 dollars.

Oil prices earlier had pulled back after striking record highs above 115 dollars Thursday on the back of a weakening dollar and tight US energy stockpiles.

“We saw crude come down earlier on, off the back of the stronger US dollar, but the underlying factor is there are still supply concerns for crude,” said CMC Markets trader Nas Nijjar, adding that some traders were using crude’s earlier decline to re-establish long positions ahead of the New York contract’s expiry next week.

Supply fears were stoked after Nigerian militants claimed Friday to have sabotaged a major oil pipeline belonging to Anglo-Dutch oil group Royal Dutch Shell, promising “many more” similar attacks.

The pipeline targeted late Thursday was connected to the Bonny exports terminal — the largest in the country with a storage capacity of around 7 million barrels of crude oil, the militants said in a statement.

Shell spokesmen in Nigeria and the Netherlands have been unable to immediately confirm the attack due to the remoteness of the area in which the militants claim to have struck.

Shell, Nigeria’s largest oil operator, accounts for around half of the country’s 2.1 million barrels per day output. Supply risks are helping to boost prices as many investors continue to view crude markets as tight.

A rebound in the dollar has helped to keep gains in check, as commodities priced in the US currency become more expensive for overseas investors. A surge in US equity markets Friday also curbed the appeal of crude markets as a financial hedge against the recent economic turmoil and dollar weakness.

Speaking before the 116-dollar breakthrough in New York, Sucden analyst Andrey Kryuchenkov said trading had been “relatively quiet but still supported by persistent supply concerns and the weak dollar.”

The US dollar, which hit a fresh record low against the euro on Thursday, stimulates demand for dollar-priced goods because they become cheaper for foreign buyers holding stronger currencies.

“The broad weakness in the US dollar is still supporting commodities; while oil investors are also concerned about tight gasoline supplies in the US ahead of the summer driving season when demand for gasoline peaks,” Kryuchenkov said.

Prices rocketed to historic heights this week after news of sliding energy stockpiles in the United States, the biggest energy consumer.

US crude oil inventories slumped 2.3 million barrels in the week ending April 11, far more than the consensus forecast of 1.8 million.

Crude reserves stand at 313.7 million barrels, in the lower half of the average range for this time of year.

Gasoline stocks fell 5.5 million barrels, four times more than market expectations.

On Sunday, the oil world’s leaders are to gather in Rome for the International Energy Forum amid political calls for increased production as record crude prices weigh on a slowing global economy.

Oil ministers from the 12-nation Organization of the Petroleum Exporting Countries (OPEC) will be joined by chief executives of major producers as some 500 delegates assemble for the three-day biannual conference.

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