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Crude Oil Rises Above $133 on Nigeria Attacks, Asian Subsidies


Crude Oil Rises Above $133 on Nigeria Attacks, Asian Subsidies 

By Christian Schmollinger

The Movement for the Emancipation of the Niger Delta, Nigeria’s main militant group, said it attacked a crude-oil pumping station operated by Royal Dutch Shell Plc. Asian demand may increase 729,000 barrels a day, or 2.9 percent, this year, the largest globally, the International Energy Agency said May 13.

“Nigeria is such a bad area that it’s more of a surprise if a week goes by and nothing bad has happened,” said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore. “Any demand decrease out of the U.S. is immediately eclipsed by anything out of the Asian region right now and that has everything to do with subsidies.”

Crude oil for July delivery rose as much as $1.27 a barrel, or 1 percent, to $133.46 a barrel on the New York Mercantile Exchange from the May 23 close. Prices were at $133.20 at 12:13 p.m. Singapore time. Floor trading was closed yesterday for the Memorial Day holiday and electronic transactions were booked to today for settlement.

Brent crude oil for July settlement gained for the third day, climbing as much as 71 cents, or 0.5 percent, to $133.08 a barrel, on London’s ICE Futures Europe exchange. It was at $133 a barrel at 12:12 p.m. Singapore time.

The contract gained 80 cents, or 0.6 percent, to $133.16 a barrel yesterday.

New York oil futures have increased 24 percent in the past two months and reached a record $135.09 on May 22 after the dollar posted its biggest weekly decline against the euro since March. A weaker dollar prompts investors to buy commodities as a hedge against inflation.

Nigeria Attack

Nigeria, Africa’s biggest producer, is now OPEC’s eighth- largest member by output after attacks by militants this year halted as much as 164,000 barrels of Shell’s daily output.

Some production has been lost after an attack on the Nembe Creek trunk line in Nigeria’s Rivers State, Caroline Wittgen, Shell’s spokeswoman, said yesterday. The attack was timed to protest the one-year anniversary of President Umaru Yar’Adua‘s administration, MEND said in an e-mailed statement.

The group claimed responsibility for four attacks in April and a May 2 strike on oil installations operated by Shell’s Nigerian venture. MEND actions forced Shell to announce delays in deliveries of Bonny Light Crude in April and May and halt the equivalent of 169,000 barrels a day of production.

Fuel Subsidies

Indonesia raised fuel prices by an average of around 29 percent on May 24, the first time in three years, to cut subsidy costs. Diesel fuel will still cost 5,500 rupiah a liter, or the equivalent of $2.24 a gallon, compared with the U.S. average of $4.64 a gallon.

Indonesia would have spent 190 trillion rupiah ($20 billion) on subsidies this year if it hadn’t raised prices, Finance Minister Sri Mulyani Indrawati said on May 21.

Lanka IOC Ltd., the Sri Lankan unit of Indian Oil Corp., raised diesel prices for the second time this year on May 22 to narrow losses amid record-high crude oil costs.

Lanka IOC increased the price of diesel by 20 rupees to 100 rupees a liter (93 cents), Managing Director K. Ramakrishnan said in a telephone interview. The Colombo-based company held the price of petrol.

China Petroleum & Chemical Corp. was paid about 7 billion yuan ($1 billion) in state subsidies for oil imports in April to compensate for selling fuels at below cost, figures from a company official show.

China paid Sinopec, as Asia’s largest refiner is known, 600 yuan to 700 yuan for each metric ton of crude oil imports, the official said today, asking not to be identified because of company rules. The company imported more than 10 million tons of crude oil last month, the official said. The country has fixed diesel prices at around 4.9 yuan a liter, or $2.70 a gallon.

“Subsidies will have to remain in place as you don’t want these economies to collapse,” said Hudson’s Kornafel. “It’s just a matter of relaxing them so that the governments don’t become bankrupt on one hand or get overthrown on the other hand.”

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

Last Updated: May 27, 2008 00:40 EDT and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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