By: Reuters | 25 Jun 2009 | 10:11 AM ET
Oil rose above $69 a barrel on Thursday after Nigeria's main militant group shut down one of Royal Dutch Shell's pipeline junction points, heightening concerns about supplies from the region.
In the latest in a string of attacks in Nigeria, Africa's biggest oil producer, the Movement for the Emancipation of the Niger Delta (MEND), said it had sabotaged the Billie-Krakama pipeline in Rivers State, which supplies one of the country's main export terminals.
Attacks from MEND have forced foreign oil companies, including U.S. oil major Chevron [CVX 67.11 1.39 (+2.12%)] and Italy's Agip, to shut at least 133,000 barrels per day of oil production in the last month.
Shell said it had shut down one of its pipeline junction points on Thursday but declined to say whether any oil production had been affected.
Analysts said the effect on prices had been subdued with plenty of spare supply capacity available around the world, as the global recession has cut demand for oil.
"The Nigerian attacks have definitely been supportive, but the impact is less in the current economic environment as there's plenty of spare capacity in the oil industry right now," Andrey Kryuchenkov, an analyst at VTB Capital in London, said.
"When we were rallying towards $150 a barrel last summer a small sneeze in Nigeria would send the market rallying at least $2 a barrel. There's less of a geopolitical premium in prices now," Kryuchenkov added.
Falling demand for oil sent oil prices crashing from record highs close to $150 a barrel last July towards $30 a barrel at the turn of the year.
Since mid-April, however, prices have risen sharply on prospects for an economic recovery.
A Reuters poll of industry analysts showed oil prices are expected to average more than $70 a barrel in 2010, compared with the latest forecast average of $56.59 for this year.
Rising Inventories
On Wednesday, U.S. government data showed stockpiles of gasoline in the world's largest energy consumer rose 3.9 million barrels last week, exceeding analysts' predictions.
Stockpiles of distillates — such as diesel and heating oil — have risen to 10-year highs due to the recession. But prices took support from a large drop in stockpiles of crude oil, which declined by 3.8 million barrels last week.
The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft. Gross domestic product dropped 5.5 percent in the first quarter, from 6.3 percent in the last quarter of 2008.
Separately, the Labor Department said the number of workers filing new claims for jobless benefits unexpectedly rose last week by 15,000 to a seasonally adjusted 627,000 — a measure of the strain still faced by hard-pressed consumers.
Oil pulled back slightly falling the jobless claims report, with the dollar strengthening as investors' appetite for risk was curbed.
A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.
Consider the following…
Oil is one of the most important natural resources known to mankind. For most societies in the world, oil is the principal natural resource that fuels their economies. Then why, in this great age of communication and technology, do we need to be concerned about a natural resource like oil? Simple. Nearly 98% of everything you have or do is in some way related to crude oil. Heat for your home, gas for your car, 2 liter plastic bottles for pop, and petroleum jelly are just a few examples of products created from crude oil. The United States has the greatest standard of living in the world, as well as the largest economy. Why? Because we have always tried to maintain control over the supply, as well as price, of oil. Over the last 10 years, the U.S. economy has undergone the largest economic expansion in history and cheap oil has fueled this unprecedented growth. Unlike the 1970s, when the U.S. was held at bay by OPEC withholding oil production for political reasons, the growth of the oil industry during the 1990s, and beyond, will be more likely be determined by the laws of supply and demand. As democracy and capitalism are spreading around the world, global oil consumption is at record levels. Throughout Latin America, Russia, India and Asia, economic growth is accelerating at a remarkable pace; much faster than anything we have seen in the U.S. Recently, Forbes described the development now exploding across Asia. --Forbes
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Oil Clock
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