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Tue, Jun 24, 2008 - Page 10 News List

Oil prices rise on pipeline damage, OPEC meeting


World oil prices rose in Asia yesterday after militants blew up a Nigerian oil pipeline, intensifying concerns about tight global crude supplies despite Saudi Arabia's output hike, dealers said.

New York’s main oil futures contract, light sweet crude for August delivery, was US$0.94 higher at US$136.30 per barrel. The July contract had leapt US$2.69 to close at US$134.62 before expiring on Friday.

Brent North Sea crude for August was US$0.94 higher at US$135.80 per barrel after rising US$2.86 to settle at US$134.86 on Friday in London.

Saudi Arabia’s King Abdullah on Sunday condemned oil “speculators” at a summit of leaders that debated the spiraling price of crude, which has doubled over the past year.

The king also announced Saudi output had risen to 9.7 million barrels per day, from 9.45 million barrels earlier, amid growing calls from consumer nations for the feverish rise in crude prices to be brought under more control.

Saudi Arabia is the world’s lynchpin oil producer and the largest in OPEC, which pumps about 40 percent of the world’s crude.

But experts said there were other sources of tension in the oil market counteracting the Saudi output hike.

“It’s really not too significant compared to the disruption in Nigeria,” said Victor Shum of Purvin and Gertz international energy consultancy in Singapore.

Militants in Nigeria blew up a key Chevron oil supply pipeline in the latest attack targeting the country’s oil industry, company and military sources said on Saturday.

The US oil giant was forced to shut down operations after the attack in the volatile Niger Delta, halting output by 120,000 barrels per day, an industry source said.

The Anglo-Dutch oil giant Shell has also said it cannot promise to deliver 225,000 barrels per day for this month and next following an unprecedented raid on its offshore Bonga oilfield.

Unrest in the Niger Delta has cut total oil production in one of Africa’s biggest producers by a quarter over the past two years.

“There were no concrete measures that would change the structural tightness in global oil markets,” Shum said of the summit in Jeddah.

Neither were there measures to address geopolitical factors that have also helped boost prices, Shum said.

Among those factors are worries about a possible Israeli military strike against Iran’s nuclear facilities.

“With further threat of attack on Iran from Israel and further supply disruptions in Nigeria, the oil price is now destined to rise further,” said John Hall, who runs energy consultancy John Hall Associates.

The summit called for greater transparency in market dealings and for an increase in investment to ensure adequate supplies.

The Saudi king vowed to further increase production if necessary.

The price of oil soared to almost US$140 per barrel this month, sparking angry protests in several countries and fears for global economic growth.

The monarch told the summit that his country was “very concerned” about consumers worldwide in the wake of the sharp rise in crude costs. He blamed increased oil consumption and taxes on fuel, but added: “Among other factors behind this unjust increase in oil prices is the abhorrent act of speculators acting for their own selfish interests.”

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