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Oil Is Little Changed After Rising on Nigeria Supply Disruption

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Oil Is Little Changed After Rising on Nigeria Supply Disruption 

By Christian Schmollinger

June 24 (Bloomberg) — Crude oil was little changed after rising in the past two days in New York as disruptions in Nigeria have removed more supply from the market than Saudi Arabia’s promised output increase.

Attacks on a Royal Dutch Shell Plc platform and a Chevron Corp. pipeline last week halted 300,000 barrels a day of Nigerian output. The country’s white-collar oil union began a strike against Chevron today that may stop as much as 350,000 barrels a day. Saudi Arabia will pump an extra 200,000 barrels a day next month, Oil Minister Ali al-Naimi said on June 22.

“When you have so many short-termed focused traders in the market, something like what’s happening in Nigeria has a big influence,” said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne.

Crude oil for August delivery was at $136.61 a barrel, down 13 cents, on the New York Mercantile Exchange at 2:38 p.m. Singapore time. The contract climbed as much as 74 cents, or 0.5 percent, to $137.48 a barrel.

Prices touched a record $139.89 on June 16 and are up 98 percent in the past year. Yesterday, oil rose $1.38, or 1 percent, to settle at $136.74 a barrel.

An attack on Shell’s Bonga platform, off the coast of Nigeria, 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 its pipeline was blown up last week.

After the latest round of attacks, the Movement for the Emancipation of the Niger Delta said it will declare a cease- fire starting today to “give peace and dialogue another chance.” Action against foreign oil companies in Nigeria will end at midnight local time today, the group said.

Low-Sulfur Oil

Brent crude oil for August settlement was at $135.74 a barrel, down 17 cents, on London’s ICE Futures Europe exchange at 2:40 p.m. Singapore time. It rose $1.05, or 0.8 percent, to settle at $135.91 a barrel yesterday. Prices climbed to a record $139.32 on June 16.

Nigeria produces low-sulfur, or sweet, oil prized by refiners because of the high proportion of gasoline and distillate fuels it yields. Distillate fuel includes heating oil and diesel.

“The employees belonging to the Petroleum and Natural Gas Senior Staff Association of Nigeria have declared a work stoppage,” Chevron spokeswomanMargaret Cooper said yesterday in a statement.

Cooper said it’s too early to comment on the impact of the strike on operations. Chevron in 2007 produced about 350,000 barrels of oil a day from its 32 fields in Nigeria, according to the company’s Web site.

Full-Scale Strike

Jonathan Omare, secretary of the local Chevron union, said a full-scale strike had begun, though production wasn’t affected yet. “The strike is everywhere,” Omare said by telephone. `Nobody’s working apart from the guys in the field.”

Saudi Arabia first pledged to raise output by 200,000 barrels a day after King Abdullah met with United Nations Secretary-General Ban Ki-Moon on June 15.

“The market had heard 200,000 barrels but you’re always looking for something better than that to make the prices go down,” ANZ’s Pervan said. “Something in the order of 500,000 would have been what traders were looking for.”

The kingdom will offer more oil if there is demand and also plans to increase its production capacity to 12.5 million barrels a day by the end of next year, Al-Naimi said on June 22 at a summit in Jeddah. Capacity may eventually rise to 15 million if necessary, using oil from five “mega” fields that could potentially start up within three years, Al-Naimi said.

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

Last Updated: June 24, 2008 02:49 EDT

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