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.