Oil Near Highs, Nigeria Threat Eases
By Reuters
08 October, 2004
ReutersOil prices held near record highs on Friday even though oil unions in OPEC member Nigeria said a two-day wildcat strike would pass without any impact on exports.
U.S. light crude (CLc1: Quote, Profile, Research) by 1205 GMT slipped 29 cents to $52.38 a barrel, after touching $53 on Thursday, the third day in a row prices set all-time highs.
London Brent (LCOc1: Quote, Profile, Research) slipped 20 cents to $48.70 after an early rally had struck a new record $49.30 a barrel.
Prices made only limited losses after a senior union official said a two-day strike by Nigerian oil workers at Royal Dutch Shell Group (RD.AS: Quote, Profile, Research) (SHEL.L: Quote, Profile, Research) would end later on Friday and that exports continued normally.
Strong demand growth, particularly in China, has helped oil surge 60 percent this year, drawing OPEC to pump at a 25-year high and leaving little margin for supply disruptions or refinery outages.
"Demand growth is outstripping supply growth and there's very little prospect for that to change," said Rus Newton of commodities hedge fund manager Global Advisors.
"Prospects of maintaining supply growth at current levels are extremely limited," Newton added
Stretched supplies have been further stressed by the lingering loss of U.S. production from the Gulf of Mexico where around 475,000 bpd remains out of commission over three weeks after Hurricane Ivan hit the region.
Oil major BP, which operates nearly half the lost output, said this week that it did not expect to restore full flows until the end of this month.
This outage coupled with last month's refinery closures during the hurricane have hindered efforts to build U.S. heating oil inventories ahead of the winter, when demand for the fuel peaks in the U.S. northeast.
U.S. heating oil prices have already hit record highs on concern that supplies will tighten further as temperatures drop.
Tight inventories have magnified concerns over the impact of any disruptions to international supplies.
In Nigeria, a general strike by the umbrella labor union looms on Monday over rising domestic fuel prices, although officials said they were not trying to hit exports.
Nigeria supplies refiners in Asia, the United States and Europe with the high-quality crude grades prized for their high yield of transportation and heating fuels.Production is being curtailed in Norway by a rig workers strike that unions say will widen at the weekend to shut in 55,000 bpd of the nation's three million bpd.
Oil dealers are keeping a close eye on the impact of fuel costs on global economic growth.
Despite this year's sustained surge in prices, officials have expressed mixed views on the potential impact on economic growth.
The European Central Bank on Thursday injected a note of caution into hopes for euro zone economic recovery and retreating inflation, saying oil prices were making the outlook less certain.
"If oil prices remain high, it could dampen the strength of recovery, both inside and outside the euro area," said ECB President Jean-Claude Trichet.
Japan also sounded a note of caution on Friday.
"Japan's economy is recovering firmly, but one of the greatest risks is oil prices," said Japanese Economics Minister Heizo Takenaka
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