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Oil Rises a Fourth Day on Nigerian Output, Goldman’s Forecasts

Bloomberg

 

 

Oil Rises a Fourth Day on Nigerian Output, Goldman’s Forecasts 

By Christian Schmollinger

June 25 (Bloomberg) — Crude oil rose for a fourth day in New York after Chevron Corp. halted part of its Nigerian output and Goldman Sachs Group Inc. increased oil price forecasts.

Chevron’s unit said yesterday it declared force majeure on onshore wells in the country after a pipeline was breached on June 19, shutting production. Royal Dutch Shell Plc closed the Bonga field in Nigeria June 19 after militants attacked a production vessel at the offshore facility.

“The market is concerned that supplies are still tight,” said David Moore, a commodity strategist for Commonwealth Bank of Australia Ltd.

Crude oil for August delivery rose as much as 38 cents, or 0.3 percent, to $137.38 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $137.25 at 3:39 p.m. Singapore time. Yesterday, futures rose 26 cents to settle at $137 a barrel after touching $138.75, the highest since reaching a record $139.89 on June 16, on concern that production losses will deepen.

U.S. motor-fuel purchases fell for a ninth straight week as record prices crimped demand, a MasterCard Inc. report showed yesterday. Saudi Arabia, the world’s largest oil producer, on June 22 promised to add 200,000 barrels a day of output.

“We’ve had evidence of consumption adjustments to the increase in oil prices. So that’s tended to hold the oil price,” Moore said.

Goldman Forecasts

Arjun N. Murti, the Goldman Sachs analyst who last month said oil may rise to between $150 and $200 a barrel within two years, has increased his price forecasts because production is failing to keep up with demand.

U.S. benchmark West Texas Intermediate crude oil may average $118 a barrel this year, higher than an earlier forecast of $108 on May 5, Goldman analysts led by Murti wrote in a June 18 report. Oil futures in New York have averaged $110.31 a barrel so far this year. The price was also raised for 2009 to $140 from $110, and for 2010 to $150 from $120, they said.

Brent crude oil for August settlement rose as much as 54 cents, or 0.4 percent, to $137 a barrel on London’s ICE Futures Europe exchange.

Damage to Shell’s platform was “very limited” but force majeure remains in place at Bonga for the time being, Shell spokesman Rainer Winzenried said from The Hague.

Following the attack, Shell invoked the legal clause that allows producers to miss contracted deliveries because of events beyond their control.

Nigerian Output

“Everyone just seems numb to it all,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “That situation in Nigeria just doesn’t seem to be getting any better. It’s chronically bad.”

Bonga crude-oil shipments were scheduled to average 190,000 barrels a day in June and about 184,000 barrels daily in July, according to loading schedules.

Nigeria was overtaken by Angola in April as Africa’s biggest oil producer as attacks cut the country’s output.

Chevron said that its offshore production wasn’t affected.

Oil may fall as the Federal Reserve might end a run of seven interest-rate cuts. The reductions have caused the dollar to decline, prompting investors to purchase commodities as an inflation hedge.

Traders see a 90 percent chance policy makers will leave the target rate for overnight lending between banks at 2 percent today, compared with 84 percent odds a week ago, interest rate futures contracts on the Chicago Board of Trade indicate. The rest of the bets are for a quarter-percentage point increase.

“Most people are expecting that rates will be unchanged but if there is any chance for a change, it would be an increase, which is bearish for oil,” Mitsubishi’s Nunan said.

Demand Falls

U.S. gasoline demand fell 2.7 percent last week, a sign motorists are cutting back on vacation plans as pump prices touch records, said MasterCard.

Consumers purchased an average 9.45 million barrels of gasoline a day in the week ended June 20, down from 9.71 million a year earlier, MasterCard, the second-biggest credit-card company, said in its weekly SpendingPulse report.

The drop in demand came with prices at the pump 36 percent higher than a year earlier, according to the report. Prices have surged amid a doubling of crude oil, which accounts for about 73 percent of the cost of gasoline.

“It’s definitely starting to take a toll on U.S. demand,” said Mitsubishi’s Nunan. “U.S. demand is starting to give but the rest of the world isn’t cooperating.”

U.S. Stockpiles

U.S. crude-oil stockpiles probably fell 1.1 million barrels in the week ended June 20 from 301 million barrels, according to the median of responses by 12 analysts before an Energy Department report today. Inventories dropped as refiners increased their output and on rising storage costs.

Refineries probably operated at 89.6 percent of capacity last week, up 0.3 percentage point from the week before, according to the median of responses.

Gasoline supplies likely remained unchanged at 208.9 million barrels, according to the responses. Distillate-fuel stockpiles probably rose 2 million barrels from 116.6 million, the survey showed. It would be the seventh-straight rise.

The Energy Department is scheduled to release its weekly report on inventories at 10:35 a.m. in Washington.

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

Last Updated: June 25, 2008 03:49 EDT

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