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Crude
oil rose to a record near $120 a barrel after BP Plc.
shut a North Sea pipeline and gunmen attacked police
guarding
Nigeria’s
largest oil and gas terminal.
BP
closed the Forties Pipeline System, carrying 40 percent
of the UK’s oil production, after a strike at the
Grangemouth refinery cut power supplies. Five policemen
were killed in Monday’s attack in the Niger Delta where
output has dropped by 50 percent since April 25, adding
to concerns about supplies ahead of the Northern
Hemisphere summer driving season.
“The
bulls are still in control so it’s no surprise to be
near $120 on these supply concerns,” said Victor Shum,
senior principal at Purvin & Gertz Inc. in Singapore.
“Nigeria is back on top of traders’ minds. The
disruptions are real and this is high-quality crude
needed by the US refineries for gasoline production in
the summer.”
Crude
oil for June delivery rose as much as $1.41, or 1.2
percent, to $119.93 a barrel in after-hours electronic
trading on the New York Mercantile Exchange, the highest
since the futures began trading in 1983. It was at
$119.34 at 1:02 p.m. in Singapore. Prices have surged 82
percent in the past year.
The
contract jumped 2.1 percent to $118.52 a barrel April 25
when the refinery strike and pipeline closure were
announced.
“The
production affected at the moment is pretty
substantial,” said David Moore, the commodity strategist
at Commonwealth Bank of Australia Ltd. in Sydney. “It
all counts nowadays. The price would suggest the market
is very tight.”
June
premium
Oil for
delivery in June is selling at a premium of $1.04 a
barrel to July supplies. The price difference becomes
more pronounced for later month contracts as June’s
premium to the December future has jumped to $4.80 a
barrel.
Brent
crude for June settlement rose as much as $1, or 0.9
percent, to $117.34 a barrel in London’s ICE Futures
Europe exchange and was trading at $117.06 a barrel at
12:53 p.m. in Singapore. It reached a record $117.56 on
April 25.
Refinery
production at Grangemouth will resume on April 29 at 7
a.m. local time. Units crucial to restart flows on the
Forties pipeline will have priority, Richard Longden,
spokesman for operator Ineos Group Holdings Plc., said
Monday.
Oil
grades from the North Sea and Nigeria, Africa’s biggest
producer, are low in sulfur and favored by refiners.
Nigeria is losing about 50 percent of its output after
staff at Exxon Mobil Corp.’s operations went on strike
April 24 and militants attacked a Royal Dutch Shell Plc
pipeline later the same day.
“Nigerian crude is quite good quality and the US
probably imports about 10 percent to 15 percent from
them,” said Tetsu Emori, fund manager at Astmax Ltd. in
Tokyo. “It’s affecting the supply and the quality” for
the refiners.
Exxon
strike
Nigeria
pumped 1.96 million barrels a day in March, according to
Bloomberg estimates. Recent attacks on Shell-run
pipelines, including the latest one, are cutting oil
flows by about 140,000 barrels a day, the country’s oil
minister H. Odein Ajumogobia said on April 25. The Exxon
Mobil strike is halting about 765,000 barrels a day,
according to union estimates.
The loss
of production in the
North Sea and Nigeria
follows reports of output declines in
Russia
and Mexico, two of the biggest suppliers that are not
members of the Organization of Petroleum-Exporting
Countries.
“On top
of everything in the
UK
and everything in Nigeria, it seems like everyday we’re
having new supply problems,” said Jonathan Kornafel, a
director for Asia at Hudson Capital Energy in Singapore
in an interview with Bloomberg Television.
“It’s
political, it’s supply. Everyday there’s something
pushing prices higher.”
New York
oil futures are 79-percent higher than a year ago, with
almost a quarter of that gain booked this month as the
falling dollar and declining US gasoline stockpiles
spurred fund managers to invest in fuel and crude oil.
Net-longs increase
Hedge-fund managers and other large speculators
increased bets on rising oil prices a third time in the
week ended April 22, according to US Commodity Futures
Trading Commission data.
Speculative long positions, or bets prices will rise,
outnumbered short positions by 70,562 contracts, a
6-percent gain, the Washington-based commission said in
its Commitments of Traders report. This is the highest
since the week ended March 21.
Oil
prices are likely to fall to “more realistic levels”
once the Forties pipeline has reopened, said Ben Barber,
a broker at Bell Commodities Ltd. in Melbourne. US
stockpiles and the dollar are rising and there is a risk
prices will fall this week if the Federal Reserve
signals an end to recent interest rate cuts.
“Oil is
quite susceptible,” he said.
The
Federal Reserve will probably cut its target-lending
rate by a quarter-point to 2 percent on April 30,
according to futures traded on the Chicago Board of
Trade, the smallest reduction in four months. |
