Crude Oil Trades Near Record as Nigerian Attacks Cut Supply

Bloomberg: Crude Oil Trades Near Record as Nigerian Attacks Cut Supply

By Christian Schmollinger

April 22 (Bloomberg) — Crude oil traded near a record in New York on concern that supply disruptions in Nigeria will reduce the amount of U.S. gasoline available to meet demand during the summer driving season.

Oil surged to $117.83 a barrel yesterday after Royal Dutch Shell Plc said 169,000 barrels a day were suspended because of attacks last week in Africa’s largest producer. Nigeria, the fifth-largest exporter to the U.S. last year, produces low- sulfur crude prized by refiners because of the proportion of high-value gasoline it yields after processing.

“This market is very sensitive to any kind of a supply shock,” said Mark Pervan, a senior commodity strategist with Australia & New Zealand Banking Group Ltd. in Melbourne. “With no established resistance levels in the market, prices seem to move pretty freely upwards, getting to new fresh highs.”

Crude oil for May delivery was at $117.45 a barrel, down 3 cents, at 12:22 p.m. Singapore time in after-hours electronic trading on the New York Mercantile Exchange. Yesterday, oil futures rose 79 cents to settle at $117.48 a barrel on Nymex, the highest close since the contract was introduced in 1983.

The May contract expires today. The more active June contract was at $116.68 a barrel, up 5 cents, at 12:25 p.m. Singapore time.

“The market is finally focused on the supply issues,” said Tetsu Emori, fund manager at Astmax Ltd. in Tokyo. “The U.S. imports the Nigerian crude because it’s very good quality for producing gasoline.”

Brent crude for June settlement was at $114.55 a barrel, up 12 cents, on London’s ICE Futures Europe exchange at 11:51 a.m. Singapore time. The contract rose 51 cents, or 0.5 percent, to settle at a record $114.43 a barrel yesterday. It reached $114.86, the highest since trading began in 1989.

Supply Problems

Shell will declare a force majeure on exports of Bonny Light crude oil starting today as a result of the April 17 attack, spokesman Rainer Winzenried said in an e-mailed statement yesterday. Force majeure is a legal clause that allows companies to miss contracted deliveries because of circumstances beyond their control.

Nigeria is the sixth-largest producer among the Organization of Petroleum Exporting Countries, pumping 1.96 million barrels a day of crude in March, according to a Bloomberg survey. The country’s output has fallen from 2.4 million barrels a day at the end of 2005 as militant attacks have increased.

Supply problems in countries outside of OPEC have added to concerns that demand may be unmet, especially as the group has insisted it will not raise output targets.

Cantarell Declines

Petroleos Mexicanos, the state-owned oil company, said crude oil output in March dropped 11 percent from a year ago as its largest oil field, Cantarell, declined the most in at least 18 years. Russia, the world’s second-largest producer, said its first-quarter production fell 1 percent.

“As long as OPEC doesn’t intend to pump up its production, the consuming countries will have to rely on non-OPEC supply,” said Astmax’s Emori. “But it’s not looking like they can cover the additional supply.”

Prices may pare their gains as U.S. crude-oil stockpiles are expected to have increased last week amid rising imports, a Bloomberg News survey indicated.

Oil supplies advanced 1.6 million barrels in the week ended April 18 from 313.7 million barrels, according to the median of responses from seven analysts before this week’s Energy Department report on April 23.

Gasoline inventories probably dropped 2.5 million barrels from 215.8 million barrels the week before, according to the median of responses. All of the analysts forecast a decline.

Analysts were split over whether supplies of distillate fuels, a category that includes heating oil and diesel, rose or fell. Stockpiles were probably unchanged at 106.1 million barrels, according to the median of estimates in the survey.

Refineries operated at 82.1 percent of their capacity last week, the survey showed, up 0.7 percentage point from 81.4 percent the week before, the lowest rate since October 2005.

To contact the reporter on this story: Christian Schmollinger in Singapore at [email protected].

Last Updated: April 22, 2008 00:30 EDT

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.