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Global Oil Crisis: Oil Rises as Saudi Pledge Fails to Ease Global Supply Concerns




Oil Rises as Saudi Pledge Fails to Ease Global Supply Concerns 

By Grant Smith

June 23 (Bloomberg) — Oil rose to within $3 of a record on speculation Saudi Arabia’s output increase may not raise global supply because of production halts in Nigeria and the North Sea.

The world’s biggest oil producer will pump an extra 200,000 barrels a day next month, Saudi Arabia’s Oil MinisterAli al- Naimi said in Jeddah yesterday. Militant attacks on Royal Dutch Shell Plc and Chevron Corp.’s facilities in Nigeria last week halted more than 300,000 barrels a day. North Sea output has fallen after two emergency platform evacuations.

“Any effect that the extra Saudi oil might have had in cooling prices is being offset by the latest woes in Nigeria and the North Sea,” said Christopher Bellew, a senior broker at Bache Commodities Ltd. “The decision in Jeddah really just confirmed what Saudi Arabia had already said they’d add.”

Crude oil for August delivery rose as much as $2.14, or 1.6 percent, to $137.50 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $136.61 a barrel at 10:34 a.m. London time.

The July contract expired on June 20, gaining $2.69, or 2 percent, at $134.62 a barrel. Futures reached a record $139.89 on June 16.

“At the end of the day, the Saudis pretty much told us there was not much they could do immediately,” Peter Beutel, president of New Canaan, Connecticut-based Cameron Hanover Inc., said in a Bloomberg Television interview. “We already had a 200,000 barrel-a-day increase built into the market.”

Platform Attack

An attack on Shell’s Bonga offshore platform on June 19 may halt deliveries for as long as six weeks, the company said last week. The field produces about 190,000 barrels a day. Chevron halted 120,000 barrels a day of onshore production after a pipeline was blow up last week.

After the latest round of attacks, the Movement for the Emancipation of the Niger Delta said it will declare a ceasefire from tomorrow to “give peace and dialogue another chance.” Action against foreign oil companies in Nigeria will end at midnight local time tomorrow, the group said in an e-mailed statement yesterday.

Brent crude oil for August settlement rose as much as $2.38, or 1.8 percent, to $137.24 a barrel on London’s ICE Futures Europe exchange, and traded at $136.32 at 10:37 a.m. London time. The contract gained $2.86, or 2.2 percent, to settle at $134.86 a barrel on June 20.

StatoilHydro ASA’s Gullfaks A platform in the North Sea was temporarily evacuated because of a gas leak yesterday during a maintenance shutdown. Gullfaks A is one of three platforms at the field producing 111,000 barrels of oil a day.

The company halted about 150,000 barrels a day of Oseberg crude last week after a platform fire. Nexen Inc.’s 200,000 barrel a day North Sea Buzzard field, is closed this week for routine maintenance.

King Abdullah

Yesterday’s proposed output increase by Saudi Arabia, the second since May, was reported June 16 after a meeting between King Abdullah and United Nations Secretary-General Ban Ki-Moon. The kingdom will offer more oil if there is demand and also plans to increase its daily production capacity to 12.5 million barrels by the end of next year, al-Naimi said yesterday.

Hedge-fund managers and other large speculators halved their bets on rising oil prices in the week ended June 17, according to U.S. Commodity Futures Trading Commission data.

Net-long positions in New York oil futures, the difference between orders to buy and sell the commodity, fell 50 percent to 12,534 contracts, a 16-month low, the commission said June 20. Contracts to sell oil declined 1 percent.

Fuel Subsidies

New York oil prices almost doubled the past year. Prices rose on instability in producing regions, and as U.S. consumers resisted changing their driving habits and Asian fuel subsidies artificially sustained demand, Cameron Hanover’s Beutel said.

The U.S. Federal Reserve also had a “huge hand” in the increase after signaling its intention to cut interest rates to sustain the flagging economy, ensuring gains in dollar- denominated commodities, he said.

The dollar traded near a two-week low against the euro today on speculation weak home prices and declining consumer confidence in the U.S. will delay Fed moves to raise interest rates.

To contact the reporters on this story: Grant Smith in London at[email protected]

Last Updated: June 23, 2008 05:39 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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