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Crude-oil futures rose 2% Friday, boosted by news of supply interruptions in Nigeria and…

The Wall Street Journal Home Page

Crude Pushes 2% Higher

Nigeria Gives Rise To Supply Worries; 
Israel-Iran Tension
By TATYANA SHUMSKY
June 21, 2008; Page B5

Crude-oil futures rose 2% Friday, boosted by news of supply interruptions in Nigeria and potential for rising tensions between Israel and Iran.

The increase preceded an international meeting of government officials and oil executives in Jeddah, Saudi Arabia, this weekend to discuss the factors behind record-high oil prices.

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Light, sweet crude for July delivery settled up $2.69 at $134.62 a barrel on the New York Mercantile Exchange. The July contract expired Friday.

The New York Times reported Friday that Israel this month carried out an airborne military exercise that U.S. officials said resembled a “rehearsal” for a potential bombing of Iran’s nuclear facilities.

Though the military maneuvers didn’t suggest imminent conflict, traders are closely watching the situation in Iran, the No. 2 oil exporter in the Organization of Petroleum Exporting Countries.

“Potential problems like Iran and the hurricane season, those unknowns and uncertainties are helping to give this trading range its support,” said Walter Zimmermann, an analyst at brokerage ICAP/United Energy in Jersey City, N.J.

Supply interruptions in Nigeria gave crude-futures prices another leg up. Royal Dutch Shell declaredforce majeure on 225,000 barrels a day at its Bonga production facility off the coast of Nigeria after an attack Thursday. The company expects the facility to remain off line for several weeks.

Meanwhile, talks between Chevron and its white-collar workers union have collapsed for a second time. The negotiations were aimed at resolving the union’s dispute over safety conditions and staffing issues.

Saudi Arabian Oil Minister Ali Naimi said Friday the kingdom will pump an additional 200,000 barrels a day in coming weeks. The world’s top oil supplier will be producing 9.65 million barrels a day when this latest increase comes on line, its highest output since 1981, according to the U.S. Energy Information Administration.

The Saudis have called a summit this weekend to discuss the forces behind rising oil prices. Antoine Halff, deputy head of research at brokerage Newedge USA, said the increase isn’t yet assured.

“Those signals have to be taken with some degree of caution,” Mr. Halff said. “It’s not unprecedented for the Saudis to send signals ahead of a major meeting only to push for a different outcome eventually.”

Prices are unlikely to fall after the meeting unless the delegates can agree on tangible changes in the dynamics of demand and supply, Mr. Halff said.

“We could see a market reaction either way,” Mr. Halff said. “Either there’s a significant announcement with some real teeth that could push prices down, or there’s some general statement without any teeth and the market is disappointed. Then you could see some upward price response.”

http://online.wsj.com/article/SB121396986298791851.html

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