By: Reuters | 29 Jun 2009 | 12:23 PM ET
Oil rose about $2 to top $71 a barrel Monday, lifted by word of fresh rebel attacks on oil installations in Nigeria and gains in equity markets.
Nigeria's main militant group said its fighters had attacked an oil facility belonging to Royal Dutch Shell in the Niger Delta on Monday, days after President Umaru Yar'Adua proposed an amnesty.
Further support came as U.S. stocks opened higher on signs of life in the global economy, which kept investors optimistic over the prospect of a recovery.
"Equities are a little bit stronger and that has been helping the market," said Peter Beutel, president of Cameron Hanover in New Canaan, Conn., adding that buying by funds had been strong.
"Anytime that we see the Dow Jones higher, the funds take that as a sign that the economy is going to strengthen and that oil demand will strengthen along with that," he added.
Signs of a turnaround in the global economy have helped lift crude prices up from below $40 a barrel in February. The economic crisis has battered global fuel demand, knocking crude off record highs set above $147 a barrel last year.
The U.S. Energy Information Administration revised up April U.S. oil demand by 1.18 percent from its early estimate of 18.255 million barrels per day, suggesting a potential turnaround in the U.S. economy.
The EIA revision came after a bullish International Energy Agency mid-term oil demand forecast Monday, which said that there was a chance of an extended contraction and that the threat of a supply crunch had only receded, not gone away.
Based on a higher economic growth scenario, the IEA predicted Monday product demand would grow by 0.6 percent, or 540,000 bpd on average, between 2008 and 2014, taking demand from 85.8 million bpd to 89 million bpd.
Number 2 oil consumer China unexpectedly increased gasoline and diesel prices Monday by nearly 9 percent and 10 percent respectively.
Nigeria
Crude was bolstered by militant activity in Nigeria as fighters forced production outages in the West African country.
The Movement for the Emancipation of the Niger Delta (MEND) said its fighters struck the Shell Forcados platform in the Delta state at about 0230 GMT.
There was no immediate independent confirmation but Shell said it shut in some oil production at its western operations in the Delta while it investigated reports of attacks.
"The Nigerian situation is the main factor in the market," said Mike Wittner, global head of oil research at Societe Generale. "The attacks appear to be removing some oil production capacity from the market."
Friday, four militant Nigerian factions said they would accept in principle an amnesty offer from President Umaru Yar'Adua, raising hopes Africa's top oil producer would halt a battle with rebels.
Pipeline bombings, attacks on oil and gas installations and kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two-thirds of its installed oil output capacity of 3 million barrels per day (bpd).
Algerian Energy and Mines Minister Chakib Khelil said Monday oil demand was still weak due to the weakness of the U.S. and European economies and world oil stocks remained high.
Khelil said an increase in OPEC oil production was hard to envisage, despite rising crude prices.
Oil analysts say OPEC can help tighten the oil market significantly later this year if it continues to implement its promise to cut oil production by 4.2 million bpd from its September output levels.
