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Oil hovering near $130

NEW YORK - Oil prices were hovering near $130 a barrel yesterday as news of an output cut in Nigeria helped to halt the sharp decline in prices that began three days ago.

Oil futures were also bolstered by investors who saw an opportunity to buy into the market after prices fell nearly 11 per cent, earlier in the week.

By the afternoon in Europe, light, sweet crude for August delivery was up $1.43 at $130.72 a barrel in electronic trading on the New York Mercantile Exchange.

Prices yesterday were fluctuating between a low of $128.54 and a high of $132.04, responding also to relatively small changes in the valuation of the US dollar against the euro and the Japanese yen.

The Nymex contract fell $5.31 to settle at $129.29 a barrel in the overnight floor session. That brought the total decline over the past three days to nearly $16.

In London, Brent crude futures for September delivery rose 81 cents to $131.88 on the ICE Futures Exchange.

Regarding Nigeria, Eni SpA said on Thursday that it had shut down pipelines carrying 47,000 barrels of oil a day after a "sudden drop of pressure.”

A Nigerian military official said an explosion had damaged an Eni pipeline in the country’s oil-rich south early Thursday, although he didn’t know how severely.

"I can confirm that there was an explosion, but we don’t yet know if the pipeline was vandalised or if it was an accident,” Col. Chris Musa, the head of the Bayelsa State military, told The Associated Press.

Eni said in a statement that the causes of the incident were unknown but that it had already call in units to start repairs.

"A lot of the threat to Nigerian production has already been priced in, but that explosion may create some interest,” said Mark Pervan, a senior commodities strategist with ANZ Bank in Melbourne.

Attacks on the region’s oil industry infrastructure in the past two years have slashed oil output by almost a quarter in Nigeria, Africa’s top crude producer. The instability has helped push worldwide crude prices to historic highs.

Analysts also said that news the United States’ direct involvement in talks with Iran about its nuclear activities was also helping dilute some of the pressure from geopolitical factors which had been reinforcing the energy market’s bullish sentiment.

"We are for now a bit far away from the atmosphere of imminent confrontation that was fueling the market fire a few weeks ago,” said analyst Olivier Jakob of Petromatrix in Switzerland.

US Undersecretary of State William Burns will attend talks in Geneva, Switzerland, on Saturday and meet with a top nuclear negotiator from Iran, a sea change from Washington’s policy which until now had avoided direct contacts with Iran.

The United States and five other nations are trying to entice the Iranians into suspending its uranium-enrichment programme in exchange for a package of economic and political incentives.

Based on how oil prices were developing from the technical point of view, Jakob said Nymex futures were "getting into deeper trouble.”

"Buying here is an opportunity if you are a deep believer in $200 (a barrel), otherwise we think that caution would be better applied,” Jakob said in a research note.