Oil prices mixed amid rising Saudi output, Nigeria outage

13th June 2011, Comments 0 comments

World oil prices diverged on Monday as traders balanced expectations of rising Saudi Arabian output with news of a fresh supply outage in Nigeria, which is Africa's largest crude producer.

New York's main contract, light sweet crude for delivery in July, known as West Texas Intermediate (WTI), fell 84 cents to $98.45 a barrel.

Brent North Sea crude for July rose 82 cents to $119.60 per barrel in late afternoon London trade.

New York prices slid on expectations that Saudi Arabia will pump more crude after failing last week to clinch an output boost for the 12-nation Organization of Petroleum Exporting Countries (OPEC).

Riyadh had pushed to raise production to moderate price increases was rebuffed by Iran and its allies, who successfully lobbied to keep official output steady at 24.84 million barrels per day in a meeting last Wednesday.

Analysts said that all the indications nevertheless pointed to a hike in output by Saudi Arabia, which was worried that steady output would result in higher oil prices and harm the global economic recovery.

"The additional (Saudi) production is impacting WTI, but supply-side tension still very much there -- Shell Nigeria just declared force majeure," said Westhouse Securities analyst Andrew Matharu.

Saudi Arabia's official OPEC quota is 8.05 million barrels per day (mbpd) but the International Energy Agency estimates that it is already producing above that amount at 8.8 mbpd.

Meanwhile, Brent prices won support from supply problems in Nigeria, which is the world's eighth largest oil producer.

Shell in Nigeria on Monday warned it may not be able to meet its contractual obligations for June and July on its Bonny Light crude-- a type of Nigerian oil -- after multiple pipeline fires and leaks blamed on sabotage.

The Anglo-Dutch oil giant said it declared a "force majeure on Bonny Light loadings for June and July... as a result of production cutbacks caused by leaks and fires which occurred last week on the Trans Niger Pipeline (TNP)."

Investigations showed that the "incidents were caused by hacksaw cuts which indicate third party interference and activities of unknown persons," it said.

Leaks and five separate fire incidents on the pipeline occurred in four villages in Ogoniland last Thursday and the fires were put out two days later, Shell said in the statement.

Shell, which is Nigeria's leading oil operator, suspended operation in Ogoniland in 1994 following attacks on its facilities allegedly carried out by local communities.

Nigeria derives more than 90 percent of its foreign exchange earnings from oil.


© 2011 AFP

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