Oil Prices Hit Record $50
By Aljazeera
28 September, 2004
Aljazeera.netUS oil prices reached a record $50 a barrel on Monday as Nigeria emerged as the latest focus for worries about supply in an already tight worldwide energy market.The US light crude front month contract rose a further 36 cents a barrel in after-hours electronic trading to hit $50, its highest level in the 21 years of trade on the New York Mercantile Exchange.London Brent, the benchmark for European crude imports, settled 60 cents higher at $45.13, after hitting a new record of $46.28 a barrel.
"We now think that [US] crude oil could reach $61 before a meaningful sell-off occurs," investment bank Morgan Stanley said in a report to its clients.
Growing concerns over rebels in Nigeria, OPEC's fifth-largest producer, are compounding worries about supply security in Russia, Saudi Arabia and Iraq.
"All these factors create apprehension in the market and reinforce the view that we're on a knife's edge in terms of supply and demand," said Daniel Hynes, industry analyst at ANZ Bank in Melbourne. "The uncertainties heighten the risk premium applied to this market."
Global supplies have risen strongly this year but are still straining to meet the fastest demand growth in 24 years. World crude output is close to its limit after many years when OPEC producers kept large volumes untapped.
The lack of a supply cushion has reinforced the view among some investors that oil near $50 is not overpriced, despite a 50% jump in crude prices since the start of the year.
"The market faces the prospect of years without sufficient flexibility or insulation from shocks during a period of extreme geopolitical stress," said analyst Paul Horsnell of Barclays Capital.
In Nigeria, rebels seeking political reforms in the impoverished oil-producing Niger Delta forced the closure by Royal Dutch/Shell of 30,000 barrels per day as a security precaution.
The rebels, threatening output from the country that pumps 2.5 million barrels daily, said they would seek to extend the uprising across the West African producer's entire southern delta oil region.
Separately, Nigeria already has been forced to cut back output from surge capacity to prevent long-term damage to its aging facilities - the first sign that efforts by OPEC countries to quell prices by squeezing out extra output may not be sustainable.
Presidential Adviser on Petroleum Edmund Daukoru said production was reduced 10% to base capacity of 2.25 million bpd in August. Nigeria had been pumping at surge capacity of up to 2.55 million bpd.
Uncertainty over supplies from Yukos, Russia's top exporter, also is supporting prices. Yukos last week trimmed deliveries to China.
In Saudi Arabia, clashes between security forces and suspected al-Qaida followers served as a reminder of the threat to stability in the world's biggest producer.
In Iraq, insurgents fired mortar bombs at the oil ministry building on Saturday, causing minor damage but no injuries.
But Iraqi oil exports, temporarily at least, are as high as they have been since last year's US-led invasion.
Iraqi pipelines have been the target of frequent sabotage attacks.
But Monday deliveries resumed through the main northern line to Turkey after repairs from a bomb attack on 2 September. Southern exports were near full capacity.
Extra crude from OPEC, now pumping at a 25-year high, has failed to make any impact. The group produced 30.5 million bpd in September, the highest since 1979, tanker-tracking consultancy Petrologistics said on Monday.
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