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Uncertainties Keep Oil Prices At Record Levels
(AllAfrica.com English Via Thomson Dialog NewsEdge)New York, Apr 26, 2006 (Vanguard/All Africa Global Media via COMTEX) --WORLD oil prices maintained record high levels yesterday as traders monitored geopolitical developments in key crude producers even as reports claimed in Nigeria that ExxonMobil was evacuating staff from a major facility, with the development of nuclear capability in Iran which has unsettled the West.
In Nigeria, Africa's biggest producer of crude, US energy giant, ExxonMobil, denied reports claiming it had evacuated non-essential staff from the Qua Iboe export terminal amid fears of an impending attack by armed militants.
The Iranian government has refused to rule out using oil as a weapon in the worsening international standoff over the Islamic republic's disputed nuclear drive.
New York's new main contract, light sweet crude for delivery in June, rose 54 cents to $73.87 per barrel in electronic deals before the market's official opening.
The contract had hit $75.35 per barrel on Monday --matching last Friday's record level which was struck on heightened concerns over the Iranian nuclear crisis, alongside news of weak US motor oil supplies.
In London yesterday, the price of Brent North Sea crude for June delivery won 75 cents to $73.75 per barrel in electronic dealing. Brent crude had struck a historic peak of $74.79 last Friday.
In a wide-ranging speech on strategies to combat rocketing fuel prices, Bush said yesterday: "One immediate way we can signal to people we're serious about increasing supply is to stop making purchases or deposits to the strategic supply for a short time. The strategic reserve is large enough to guard against any major supply disruption over the next few months."
The US Strategic Petroleum Reserve was created in 1975 by then-president Gerald Ford to ensure an emergency supply of oil during that decade's price shocks created by war and tensions in the Middle East.
Traders tracked events in Nigeria, where ExxonMobil's Qua Iboe facility faced the threat of attack. The terminal handles exports of 650,000 barrels per day, although the firm's Nigerian spokesman, Yemi Fakayejo, said output had not yet been hit by the latest scare. "This is a precautionary step. There is no disruption in oil production and exports. Production is up and running and offshore and essential staff are at the export terminal, working," Fakayejo said.
Traders are nervous of further supply outages in Nigeria, where around 20.0 per cent of output is offline owing to militant attacks on oil and gas infrastructures in the southern Niger Delta.
"If it is true that ExxonMobil fears further attacks, it implies that we could lose another, say, 20.0-per cent of Nigeria production," Societe Generale analyst Deborah White said. "It does not affect their export capacity for the present, but the story is very worrying," she said.
Attacks by militants over the past three months have slashed Nigeria's exports, which usually stand at 2.5 million barrels per day. Disruptions to exports of Nigerian light sweet crude oil is of particular concern in the run-up to the US driving season which starts at the end of May.
Although consumers have access to large supplies of heavy, sour crude, refiners prefer light, sweet oil because of its low sulphur content and relatively high yields of gasoline, heating oil as well as diesel and jet fuel.
Demand for gasoline hits top gear next month, when many Americans take to their cars on vacation for the so-called summer driving season in the United States.
Elsewhere, Iran's national security chief Ali Larijani warned of "important consequences" for energy supplies should Iran be subjected to "radical measures" over the ongoing nuclear crisis.
The warning came ahead of Friday's deadline set by the UN Security Council for Iran, the world's fourth largest crude producer, to freeze ultra-sensitive uranium enrichment work.
President Olusegun Obasanjo has reached out to disgruntled members of the Ijaw ethnic group with a promise of regional development, but the militant groups have rejected his offer citing a lack of sincerity and commitment on the part of government.
OPEC handicapped
Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) has indicated its powerlessness to halt rising prices. Consumer nations from the United States to poor African nations are afraid high energy costs will snuff out economic growth. However, producers fear a price collapse and there are deep divisions over what to do.
OPEC says it is already pumping as much as refiners can handle. There was only lukewarm support for a Kuwait proposal to offer up all of the group's spare two million barrels per day. "The last time we offered the two million no one wanted it," United Arab Emirates' Oil Minister Mohammed bin Dhaen al-Hamli said, referring to OPEC's gesture last September.
OPEC President Edmund Daukoru said he saw little justification for offering up the cartel's spare oil yesterday. "When we did that then it was in response to an actual physical emergency," said Daukoru.
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