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Oil Trades Above $136 as Nigerian Strike May Disrupt Supplies




Oil Trades Above $136 as Nigerian Strike May Disrupt Supplies 

By Christian Schmollinger

June 13 (Bloomberg) — Crude oil traded above $136 a barrel in New York after rising yesterday on a planned strike at Chevron Corp.’s Nigerian unit, which may disrupt supplies.

The Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan, gave the company a deadline of June 18 to resolve a dispute over safety standards and staffing, a union official said yesterday. A strike may halt about 350,000 barrels a day of output and 14 million cubic feet a day of gas at 32 fields in Africa’s largest oil producer.

“The market continues to be driven by supply-side news,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The latest is the Nigerian worker union planning to strike, so that has provided some fundamental support. The general trend is still upward.”

Crude oil for July delivery was at $136.61 a barrel, down 13 cents on the New York Mercantile Exchange at 1:47 p.m. Singapore time. Yesterday, oil rose 36 cents, or 0.3 percent, to settle at $136.74 a barrel, after falling as much as $4.83. Futures reached a record $139.12 a barrel on June 6.

Oil prices traded as high as $138.30 and as low as $130.80 this week, a range of $7.50. Volatility is a measure of how far the price of a commodity deviates from average closing prices over a prior period, such as 30 or 365 days. Oil futures traded in New York veered 40.7 percent from the 30-day average today, according to Bloomberg data. They strayed 41.7 percent from the average on June 11, the highest volatility in 16 months.

“This volatility is starting to send a signal that we are losing momentum in the market,” said Mark Pervan, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “It seems to suggest that we’ve reached the top of this current market. We’re starting to get an equal view both ways on price direction.”

Brent, Strike

Brent crude oil for July settlement was at $136 a barrel, down 9 cents, at 1:21 p.m. Singapore time on London’s ICE Futures Europe exchange. Prices climbed to a record $138.12 on June 6. The July contract expires today.

The more-active August contract was at $136.95 a barrel, down 30 cents, at 1:48 p.m. Singapore time.

Pengassan sent a letter asking Chevron “to do all it can to resolve the situation amicably,” Lumumba Okugbawa, the union’s deputy secretary-general, said yesterday.

The union demanded the removal of Fred Nelson, head of the company’s Nigerian subsidiary, in the letter sent to Chevron executives in San Ramon, California. The workers allege safety standards have lapsed and Nigerian employees have been replaced with expatriates.

Ogoni Seizure

Nigeria’s state-owned oil company will take over operations in the southern Ogoni district from a Royal Dutch Shell Plc joint venture.

Shell’s removal will “calm down” unrest by Ogoniland residents, Nigerian President Umaru Yar’Adua said in a statement after talks with French President Nicolas Sarkozy in Paris.

Nigeria’s Yar’Adua said June 4 that the country would name another operator of Ogoni operations, without identifying the company. Violence has shut about 20 percent of Nigeria’s oil production since early 2006.

Shell, Nigeria’s biggest foreign oil producer, was forced to quit Ogoniland in 1993, shutting oilfields pumping about 28,000 barrels a day because of threats to employees from local communities. Access to repair pipelines and installations there has frequently been denied by locals.

“Nationalizing oil assets is not a good thing normally but in a situation like Nigeria where it’s effectively a basket case, maybe the government going in and taking control might calm things down,” said Australia & New Zealand’s Pervan.

OPEC Output

Organization of Petroleum Exporting Countries President Chakib Khelil yesterday ruled out the possibility that the oil- producer group will raise output to curb record prices when it meets with consuming nations in Saudi Arabia later this month.

“Supply is more than enough, there won’t be a change,” Khelil said in an interview today in Algiers, rejecting U.S. arguments that supply and demand, rather than speculators, are behind the surge in oil prices to more than $130 a barrel.

OPEC’s crude production rose 0.9 percent in May to 32.28 million barrels a day as Saudi Arabia and Iraq boosted supply, according to Bloomberg estimates. The 12 OPEC members with quotas are pumping close to their collective official ceiling of 29.673 million barrels a day. War-torn Iraq is allowed to produce at will.

“The big bogeyman in this market is how much more oil has OPEC got,” said ANZ’s Pervan. “The market is bloody scared about how much more OPEC can continue to crank out. They need to come out and say what the latest reserve numbers are. The moment they start doing that then I think you’ll see prices jump back significantly.”

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

Last Updated: June 13, 2008 02:23 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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