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Oil surges on Saudi and Nigeria fears

Financial Times: Oil surges on Saudi and Nigeria fears

By Chris Flood and Carola Hoyos in Rome
Published: April 22 2008 03:00 | Last updated: April 22 2008 03:00

Oil surged to a record of more than $117 a barrel yesterday amid concerns about the outlook for supplies from Saudi Arabia and production disruptions in Nigeria.

Nymex May West Texas Intermediate hit a record $117.60 a barrel but profit taking later dragged WTI down 50 cents to $116.19 while ICE June Brent lost 48 cents at $113.44 a barrel after touching a fresh peak of $114.86.

After an attack on a pipeline by Nigerian militants, Shell has closed 169,000 barrels a day of crude production and declared force majeure on Bonny Light exports for April and May.

The outlook for long-term supplies darkened as Saudi Arabia confirmed it would put on hold any further capacity expansion plans, beyond the 12.5m b/d target the kingdom is expected to reach by next year.

The International Monetary Fund warned yesterday commodity prices, especially those for food and energy, had reached levels where they risked becoming a destabilising force in the global economy.

However, Opec ministers reiterated there was no need to pump more oil as the cartel met its largest customers at the International Energy Forum in Rome yesterday.

Hussain Al-Shahristani, Iraq’s oil minister, blamed speculators for high oil prices, saying: “There isn’t much Opec can do.”

“Opec’s assertion that an increase in its oil production will not help to bring down prices should be put to the test,” said analysts at the Centre for Global Energy Studies. “The world needs Opec to err on the side of overproduction, not output restraint, if oil prices are to be brought down.”

China intends to provide monthly subsidies to Petro-China and Sinopec to compensate for increasing losses to refining by means of a reduction in value-added taxes on crude imports.

Sinopec plans to import 120m tonnes of crude this year. Analysts estimated that the tax rebate could cost $10bn if oil prices were to stay at $100.

US wheat prices fell yesterday on expectations Canadian supplies will improve with Canada’s farmers expected to plant 25.1m acres this year; an increase of 16.2 per cent on 2007. CBOT May wheat lost 29 cents at $8.40½ a bushel while CBOT May soyabeans lost 46 cents at $13.15½ a bushel.

Canada projects a record 14.8m acres will be devoted to canola (a variation of rapeseed) production this year, slightly higher than 2007. Improving weather for planting in the US dragged CBOT May corn down by the 30 cents daily trading limit to $5.69½ a bushel.

Canada’s corn plantings are expected to fall by 121.6 per cent to 3m acres.

In base metals, tin added 0.2 per cent at $21,700 a tonne after attaining a record $21,800 amid concern about supplies from Indonesia and declining gobal stocks.

Copper slipped 0.6 per cent to $8,515 a tonne, caught between concerns at supply interruptions in Chile and anecdotal reports China’s demand is proving weaker than expected.

Dealers emphasise the worsening “disconnect” between London and Shanghai copper prices, which has risen to about $1,000 a tonne.

Chinese buyers have shown little appetite to chase copper prices higher, due to rising domestic production and tighter credit controls.

But some traders say Chinese consumers cannot remain absent indefinitely and their return may spark a shift to $10,000 for copper.

Copyright The Financial Times Limited 2008 and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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