Oil prices rally on threat to Nigeria supply, Iran ($64.93/bbl)

Reuters ^ | January 17, 2006 | Neil Chatterjee

[RWR8189]

SINGAPORE (Reuters) - Oil climbed further on Tuesday as a militant threat to Nigerian oil exports and Iran's standoff with the West over its nuclear ambitions kept the market worried about supply disruptions.

London Brent crude for March was up 27 cents to $63.45 a barrel by 0329 GMT, after rising 58 cents on Monday.

U.S. light crude for February jumped 86 cents to $64.78 in catch-up gains after being closed for a national holiday on Monday. U.S. crude earlier touched $64.95 a barrel, its highest since October 4.

Crude flows from Nigeria, the world's eighth-largest oil exporter, are being threatened by violence in its oil-rich delta region, while Iran remains a longer-term concern.

"Nigeria's escalating problems though are boosting prices too. Nigeria puts almost 2.5 million barrels of crude into the market daily -- around 3 percent of global oil output," said analyst Tobin Gorey of the Commonwealth Bank of Australia.

A militant group believed to be behind a spate of attacks, the Movement for the Emancipation of the Niger Delta, said in an email to Reuters it vowed to totally destroy the country's capacity to export oil.

Royal Dutch Shell , its biggest foreign operator, is considering withdrawing more staff, a senior industry source told Reuters on Monday, after heavily armed militants killed six people in a raid on a Shell platform on Sunday.

Shell issued a statement saying it had no intention to pull out of the Niger Delta but made no mention of plans for staffing fields in the western delta swamps.

Kidnapped oil workers listed the militant group's demands as local control of the Niger Delta's wealth, payment of $1.5 billion by Shell to the state government for pollution and the release of ethnic leaders.

Crude prices in New York have risen more than 6 percent since the start of the year on geopolitical concerns and strong investor fund buying.

The market was also watching Iran as European powers on Monday began drafting a resolution to have OPEC's second-largest producer referred to the U.N. Security Council next month over its contentious nuclear program.

Blanket sanctions such as an oil embargo are deemed highly unlikely, but the OPEC giant has said any crackdown could drive up world oil prices and has not ruled out using oil for leverage.

If Iran uses its oil exports as a retaliatory political weapon and ceases exports of around 2.4 million barrels per day (bpd), the rest of the world's spare capacity would struggle to cover the deficit, especially with supply disruption in Nigeria.

Iran's OPEC governor repeated his country's call for the oil cartel to cut production by 1 million bpd when it meets at the end of this month, as it fears rising stocks during seasonally weaker second quarter demand.

"A sharp fall in oil prices prior to OPEC's end-January meeting is looking increasingly unlikely, and the pressure on OPEC to make a cut to output prior to Q2 is abating," said Barclays Capital.

[stocksthatgoup]

With Iran, Venezuala, Nigeria etc. why the hell are we waiting on ANWR?

[RWR8189]

Light Sweet Crude Oil

1/17/2006 Session Contract Detail for Feb 6

	Last				64.93
	Open High				64.82
	Open Low				64.82
	High				64.95
	Low				64.60
	Settle				63.92
	Change				+1.01
	Open Interest				101619
	Volume				0.00
	Last Updated				01/17/2006 04:21:56

Gasoline

1/17/2006 Session Contract Detail for Feb 6

	Last				1.7549
	Open High				1.7550
	Open Low				1.7550
	High				1.7600
	Low				1.7500
	Settle				1.7311
	Change				+.0238
	Open Interest				43746
	Volume				0.00
	Last Updated				01/17/2006 04:21:22

 

Natural Gas

1/17/2006 Session Contract Detail for Feb 6

	Last				8.870
	Open High				8.795
	Open Low				8.795
	High				8.940
	Low				8.770
	Settle				8.791
	Change				+.079
	Open Interest				52244
	Volume				0.00
	Last Updated				01/17/2006 04:20:36

Heating Oil

1/17/2006 Session Contract Detail for Feb 6

	Last				1.7534
	Open High				1.7260
	Open Low				1.7260
	High				1.7534
	Low				1.7260
	Settle				1.7150
	Change				+.0384
	Open Interest				47901
	Volume				0.00
	Last Updated				01/17/2006 04:25:01

[agere_contra]

"Militants in Nigeria". What's that code for, I wonder.

[R.W.Ratikal]

If the U. S. went ahead with drilling in ANWR (Alaska)and made other efforts to develop oil independence, the effect would be that the oil producing nations in OPEC would lower their prices and increase production.

The U. S. is the largest user of oil in the world and will continue to be for the foreseeable future. What happens in the U.S. market sets world prices, not the potential of Asia, China or India.

There is a suspicion that Big Oil and Big Car want to keep things the way they are with high oil prices in the $60 to $70 per barrel range. It is certainly true that both benefits from higher energy prices.

Cheaper gas prices would not necessarily be good for Big Oil and Big Car companies in the short term, but both Big Oil and Big Car is as Dependant on a robust U.S. economy as any other industry that sells a consumer product used by most people.

Do the math. Alternative energy sources is not the answer. Until some new technological breakthrough, such as nuclear power cells or long-lasting-quick charging batteries etc. occurs, cheaper oil is the only answer.

[Mulder]

There is a suspicion that Big Oil and Big Car want to keep things the way they are with high oil prices in the $60 to $70 per barrel range.

If "big oil" is so powerful, why did we have a 20 year bear market in oil during the 80s and 90s?

$60 to $70 oil will be viewed as a bargain in a couple of years.

Alternative energy sources is not the answer

It is one piece of the solution. Yes, I'm aware of the numbers on the cost of solar and/or wind vs. grid power. What those numbers fail to take into account are 1) the cost of having "no power" vs. "expensive power" if/when the grid goes down, and 2) the national security advantages of having distributed power generation.

cheaper oil is the only answer

That isn't going to happen. Global demand is growing, while supplies aren't keeping up. The last time as much new oil was discovered to replace the amount the world used up was 1985. Oil production has peaked in the United States, the North Sea, Mexico, Kuwait, and many other places. The big Saudi fields aren't far behind. Peak Oil will be here soon.