Oil rises to $71 on supply worries

LONDON - Oil rose to $71 a barrel on Friday, near a nine-month high, as a strike in Nigeria threatened more of the country’s output and Iran remained defiant over its nuclear programme.

By (Reuters)

Published: Fri 25 May 2007, 7:38 PM

Last updated: Sat 4 Apr 2015, 8:37 PM

Rising tension surrounding two of the world’s leading oil producers have coincided with lower OPEC supply and relatively low gasoline stocks in top consumer the United States before the onset of peak summer demand.

“In Nigeria, there’s still quite a lot of unknown possibilities and the strike seems to be continuing,” said Tony Machacek, a broker at Bache Financial. “That will keep the market fairly well supported.”

London crude LCOc1, now seen as more representative of global oil prices, climbed 36 cents to $71.08 a barrel by 1030 GMT. It hit a 9-month high of $71.80 on Thursday. U.S. crude CLc1 rose 72 cents to $64.90.

Oil ticked higher after a Kyodo news agency report that North Korea fired several short-range missiles towards the Sea of Japan on Friday morning. The yen fell against the dollar and the euro.

On Thursday, Iran’s President Mahmoud Ahmadinejad again dismissed Western pressure to halt Tehran’s nuclear drive, saying the country’s nuclear work was nearing a “peak.”

U.S. President George W. Bush said Washington would work with European, Russian and Chinese leaders to impose a third, stronger round of UN Security Council sanctions against Iran.

In Nigeria, workers at the state oil company began an indefinite strike over welfare issues on Thursday and unions said they would target oil output if their demands are not addressed within days.

The strike comes as violence in Nigeria has already shut about a quarter of production capacity in the world’s eighth-largest exporter, or about 695,000 barrels per day.

Nigerian crude is highly valued, trading at a premium to Brent because of its gasoline-making qualities, and analysts say further disruption would send prices up.

“US gasoline running low”

“Although risks in Nigeria have largely been factored in to oil prices, new developments that threaten supplies will kick prices higher, especially during this period when U.S. gasoline supplies are running low,” said David Moore, an analyst at the Commonwealth Bank of Australia.

U.S. gasoline inventories, although rising, remain below average because of refinery problems. Demand for the fuel is still growing despite record-high pump prices.

Gasoline RBc1 rose 0.8 percent to add to gains on Thursday after news of refinery problems at Valero Energy Corp’s McKee plant and ConocoPhillips’ Louisiana unit.

Inventories have fallen in the wake of deals by the Organization of the Petroleum Exporting Countries late last year to cut production by 1.7 million bpd.

“Since OPEC took production off the market there has been a decline in global inventories,” said David Dugdale of MFC Global Investment Management.

The situation surrounding the world’s fourth-biggest oil exporter Iran and Nigeria was a slow burn also affecting the market, Dugdale said.

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