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Oil trading at $136 a barrel on Mideast tension

Oil trading at $136 a barrel on Mideast tension

Published: July 10, 2008

Filed at 4:32 a.m. ET

KUALA LUMPUR, Malaysia (AP) — Oil held close to $136 a barrel Thursday in Asia amid lingering concerns over Iran’s nuclear conflict and reports of lower-than-expected U.S. oil stockpiles.

Renewed concerns about supply disruptions out of Nigeria also emerged as the main militant group there said it would resume attacks in the country’s oil-rich river delta region because of Britain’s recent pledge to back the government.

The Movement for the Emancipation of the Niger Delta is behind two years of crippling attacks on Nigeria’s oil infrastructure that have sliced the country’s normal daily oil output by a quarter and contributed to the worldwide surge in the price of crude. MEND, as the group is known, told The Associated Press that it was abandoning a two-week-old cease-fire as of midnight Saturday.

Nigeria, Africa’s biggest crude producer, is a top supplier of oil to the United States.

”The bull run is really not over yet. The Iranian nuclear situation remains fluid and the market faces supply-side risks with global demand outpacing supply,” said Victor Shum, an oil analyst with Purvin & Gertz in Singapore.

”It remains likely that pricing will gain strength and rise to a new peak in the coming weeks,” he said.

Midafternoon in Singapore, light, sweet crude for August delivery was up 9 cents at $136.14 in electronic trading on the New York Mercantile Exchange.

The contract seesawed Wednesday in the floor session before settling a penny higher at $136.05, ending two days of sharp declines that left prices 6.4 percent below last week’s record high.

Figures from the Energy Information Administration showed U.S. oil supplies fell 5.9 million barrels, or 2 percents, last week. That is greater than the drop of 1.9 million barrels forecast by analysts surveyed by the energy research firm Platts.

Prices often rise in response to large drops in U.S. oil supplies. But gains were tempered because much of the inventory decline was on the West Coast and not representative of overall supplies, said Jim Ritterbusch of energy consultancy Ritterbusch and Associates.

In addition, gasoline stockpiles rose more than expected, partly offsetting the decline in crude. Inventories of distillate fuel, which include diesel and heating oil, also rose, but less than analysts anticipated.

In Washington on Wednesday, House Speaker Nancy Pelosi called on President George W. Bush to open up the country’s Strategic Petroleum Reserve to help stabilize oil prices. Bush has repeatedly rejected calls to use oil from the emergency government stockpile.

”Releasing some oil reserves may improve sentiment but the impact on pricing will be small. It’s unlikely to happen because there is no emergency, no oil shortage,” Shum said.

Reports that Iran’s elite Revolutionary Guards fired missiles during war games sent oil prices shooting as high as $138.38 on Wednesday. Iranian officials said the exercise was to show that the key oil producer can retaliate against a U.S. or Israeli attack.

The barrage was said to include a new version of the Shahab-3 missile, which officials have said has a range of 1,250 miles. That makes it capable of striking Israel, Turkey, the Arabian peninsula, Afghanistan and Pakistan.

Iran is the world’s fourth-largest oil producer and OPEC’s second-largest exporter. Oil traders fear any military conflict could prompt Iran to block the Strait of Hormuz, a passageway that handles about 40 percent of the world’s tanker traffic.

In other Nymex trading, heating oil futures rose 0.53 cent to $3.8569 a gallon (3.8 liters) while gasoline futures fell 0.58 cent to $3.375 a gallon. Natural gas futures dropped 0.1 cent to $12.005 per 1,000 cubic feet.

August Brent crude rose 28 cents to $136.86 a barrel on the ICE Futures exchange in London.


AP Business Writer Adam Schreck in New York contributed to this report.

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