Oil inches higher as strikes begin in oil-rich Nigeria

Oil inches higher as strikes begin in oil-rich Nigeria

Reuters, London

World oil prices rose on Monday following a nationwide strike in
Nigeria which could threaten crude supplies from the world's
eighth-biggest exporter.

Benchmark Brent crude futures were 25 U.S. cents higher at
US$27.55 a barrel while U.S. light crude stood 15 U.S. cents
stronger at $29.42 a barrel.

Traders are nervous that any supply disruption could bite into
fragile global energy stocks, especially as Iraqi crude has yet
to make any substantial return to international markets since
exports were halted ahead of the U.S.-led war.

"In the light of continuing bad news from Iraq, Nigeria is
just adding to the whole series of factors that will support
prices this week," said Paul Horsnell, analyst at JP Morgan.

Nigeria's umbrella National Labor Congress, defying a court
order, downed tools demanding that President Olusegun Obasanjo
reverse a fuel-price hike of more than 50 percent.

Oil traders are wary of a repeat of Nigeria's pre-election
violence that cut more than 800,000 barrels per day (bpd)
production off the country's over two million bpd.

Nigeria's biggest oil operator Royal Dutch Shell told Reuters
that production and exports were not yet affected by the strike
but warned it was still too early to draw a conclusion.

Blue-collar oil workers have already struck but white-collar
workers involved in oil production and loading are not on strike
yet. They have warned however that all oil sector operations will
be shut if the government fails to address the price increase "in
the shortest possible time."

Horsnell said any Nigerian disruptions could be catastrophic
for U.S. energy stocks, some 11 percent under year-ago levels,
and also for gasoline supplies, key in the summer months.

"My worry is the chance to build crude and gasoline stocks
hasn't happened in the past three months and there seems to be
little chance it will happen in the third quarter," he said,
noting that unusually high prices in the traditionally weak
second quarter looked set to continue.

The Nigerian strike comes at a time when Iraqi oil exports,
which once accounted for four percent of world oil supplies,
remain dogged by sabotage and security worries.

"We have to see how extensive the Nigerian strike becomes, but
while Iraqi oil infrastructure continues to be sabotaged, I
really can't see U.S. crude going below $27," said commodities
strategist David Thurtell at Commonwealth Bank in Sydney.

Iraqi oilfields are now pumping 800,000 bpd versus an initial
target to hit 1.5 million bpd by the end of June, though
officials say a mid-July export target of one million bpd is
still possible.

Officials said however that repairs to a key pipeline to the
Turkish Mediterranean needed to be made urgently if the export
target were not to be missed.

U.S. officials estimated that continued looting had trebled
Iraq's oil sector repaid bill, already in excess of $1 billion.