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Fears of oil price rises as attacks in Nigeria offset gains at summit

Times Online
The Times
June 23, 2008

Fears of oil price rises as attacks in Nigeria offset gains at summit

An oil pump is seen on the shore near Santa Cruz del Norte, Cuba

An oil pump is seen on the shore near Santa Cruz del Norte, Cuba June 5, 2008. Sometime next year, Cuba plans to begin drilling a major oil field off its northern coast that might do what little else has done – bring change to U.S-Cuba relations. If the embargo stays as is, a nearby source of oil will be off-limits to the energy-thirsty United States and the American oil industry will miss out on billions of dollars of business (Claudia Daut/Reuters)

Emergency talks to address the high global oil price broke up in disarray last night as ministers traded accusations over the cause of the increase and reports of fresh rebel attacks in Nigeria threatened to overwhelm a Saudi pledge to pump more oil.

After raids on facilities operated by Shell and Chevron, it emerged that Nigeria, once Africa’s biggest oil producer, is pumping oil at its lowest level in 25 years — between 1.2 million and 1.5 million barrels a day, representing a reduction of at least 325,000 barrels. The news is expected to unsettle oil markets today, despite an earlier pledge from the summit’s host, King Abdullah, to boost Saudi production by 200,000 barrels a day to 9.7 million, to raise long-term capacity from 11.7 million to 15 million barrels within a decade, and to pump more oil if the market demanded it.

Oil traders will also be assessing the impact of a ceasefire declared from midnight tonight by the Movement for the Emancipation of the Niger Delta, the most high-profile armed group in the region. The announcement appeared to be an abrupt change of position, as it had told all foreign oil workers to leave the area on Saturday.

John Hutton, the Business Secretary, told The Times that the meeting in this Red Sea port had been very constructive. However, John Hall, an independent oil analyst, gave warning that supply disruptions in Nigeria and the threat of an attack on Iran by Israel meant that the oil price was destined to rise further. He said: “Had Saudi Arabia wanted to make an impact, it should have offered to increase its output by at least 500,000 barrels per day, or even one million barrels.”

Earlier King Abdullah criticised oil speculators for helping the price of oil to double over the past year to highs of $139.89 a barrel last Monday. He also blamed high taxes and rising oil consumption in the developing world, saying: “Among other factors behind this unjust increase in oil prices is the abhorrent acts of speculators seeking to undermine the market.”

However, Samuel Bodman, the US Energy Secretary, brushed aside concerns about speculation, insisting that high global prices were the result of robust demand growth and poor supply.

Barack Obama, the expected Democratic US presidential nominee, waded into the debate over oil speculation by announcing a plan that would more than halve its price. Democrats said that they would introduce new anti-speculation bills in Congress this week.

Adding to the tense atmosphere here, Opec oil ministers also appeared divided over the impact of an increase in output and the merit of holding the meeting at all.

Speaking in Caracas, Ali Rodriguez, Venezuela’s new Finance Minister and a former head of Opec, also said that he expected oil prices to rise further, blaming speculation and a lack of US refining capacity. “I think that prices are going to continue to go up due to factors that have been behind the current increase in price,” he said.

Shokri Ghanem, Libya’s top oil official, said: “I don’t think [the meeting] is very important…it is not well prepared for. We’re coming to discuss a very important subject, supposedly, and expected to get any important decision in three hours. That’s impossible.”

A final summit communiqué contained few concrete proposals that were likely to reassure markets, beyond agreement to co-operate on building greater production capacity and to improve oil market transparency, in particular by seeking more details about the role of indexed funds.

The communiqué called for a follow-up meeting in London this autumn. Saudi Arabia also said it would donate $1.5 billion (£750 million) to help to ease the impact of the oil shock in poorer countries, telling the hastily arranged 36-nation summit that it was concerned about the global impact of high oil prices.

Meanwhile, efforts by Gordon Brown to forge a new deal between producer and consumer countries by encouraging oil exporters to invest in alternative energy including nuclear and renewables in consumer countries, met with a muted response. Mr Brown said that Qatar and Abu Dhabi had both expressed interest.

Mr Hutton told The Times that Britain’s proposals were about “squaring the circle”. He said: “We need to move away from our dependency on oil. What we need to do is to encourage a sense of continuity and long-termism.”

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4193565.ece

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