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Oil Rises Above $120 to Record on Concern Over Nigeria Attacks

Bloomberg: Oil Rises Above $120 to Record on Concern Over Nigeria Attacks 
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By Robert Tuttle

May 5 (Bloomberg) — Crude oil rose above $120 a barrel to a record in New York on concern that production disruptions in Nigeria, Africa’s biggest producer, will limit supplies.

Militant attacks on an oil-transfer facility in the country forced Royal Dutch Shell Plc to reduce output, the Associated Press reported May 3, citing the company. The Nigerian Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility for the weekend assault.

The attacks “could take more oil off the market,” said James Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois. “There is not much margin for error as far as losing barrels.”

Crude oil for June delivery rose $3.60, or 3.1 percent, to $119.92 a barrel at 11:18 a.m. on the New York Mercantile Exchange. Futures touched a record $120.21 a barrel in intraday trading. The price has gained 94 percent in the past year.

Oil also climbed as the dollar weakened against the euro and a report showed that U.S. service industries unexpectedly expanded in April, signaling stronger economic growth.

Oil is priced in U.S. dollars. The dollar traded at $1.5496 per euro at 11:19 a.m. in New York, from $1.5424 on May 2. The dollar has lost 14 percent against the euro over the past year.

Foreign nations “aren’t feeling the effect as much of these high prices,” saidJames Cordier, president of Liberty Trading Group in Tampa.

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 52 from 49.6 the prior month, the Tempe, Arizona-based ISM said. Readings greater than 50 signal growth.

Militant Attacks

MEND “overran a heavily fortified Shell flow station in Bayelsa state and destroyed the facility,” the group said in a statement. The strike took place May 3 at about 2 a.m. and led to the destruction of three well-heads, MEND said.

Shell spokesman Precious Okobolo couldn’t be reached by telephone yesterday to confirm the attack.

MEND has targeted Shell-operated pipelines in Nigeria, forcing the company to halt 170,000 barrels a day of exports of Bonny Light crude.

The group said last month it will attack every oil and gas pipeline in the nation as part of its “Operation Cyclone” campaign.

Brent crude oil for June settlement rose $3.43, or 3 percent, to $117.99 on London’s ICE Futures Europe exchange. The contract touched a record $118.50 a barrel.

Oil prices were expected to fall this week according to 14, or 61 percent, of 23 analysts surveyed May 1 by Bloomberg News.

Hedge-fund managers and other large speculators reduced bets on rising oil prices for the first time in four weeks, the U.S. Commodity Futures Trading Commission said May 2.

Net-long positions in New York oil futures, the difference between contracts to buy and sell the commodity, fell 24 percent to 53,311 contracts in the week ended April 29.

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

Last Updated: May 5, 2008 11:31 EDT

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