NEW YORK, 12 October 2004 — Oil futures prices rose slightly yesterday despite assurances from Middle East countries that they were committed to keeping the market well supplied as a strike began in Africa’s largest exporter of crude.
Traders are worried about potential supply problems stemming from strife in Nigeria, the slow recovery of production in the Gulf of Mexico following hurricanes and the amount of heating fuel available in the United States as winter approaches.
Concerns about Russian output persist, too, as oil giant Yukos struggles to repay a multibillion-dollar bill for back taxes. Crude for November delivery rose to $53.40 a barrel in morning trading, up 9 cents from its record settlement price of $53.31 set Friday on the New York Mercantile Exchange.
While oil prices are about 80 percent higher than a year ago, they are $27 below the peak inflation-adjusted price reached in 1981. Excess available output is scant, with global production capacity only about 1 percent above the daily supply of 82 million barrels. Demand rose faster than expected this year, particularly in China and India, catching many in the industry off guard.
On Sunday, US Treasury Secretary John Snow said he had received assurances from Arab oil-producing nations that they would attempt to lower crude prices by increasing supply as the Northern Hemisphere winter approaches. The Organization of Petroleum Exporting Countries has already raised its daily production quotas by 2.5 million barrels a day this year to just under 30 million barrels. On London’s International Petroleum Exchange, Brent crude futures for November delivery rose to $50.18 per barrel.
Brokers described the $50 a barrel mark as an important psychological milestone and said ongoing supply fears indicated further increases are likely.
Former Malaysian leader Mahathir Muhammad, now an adviser to his country’s national oil company Petronas, said yesterday the world did not heed warnings after earlier global shocks, like the one in 1981.
Mahathir took a potshot at US consumption, saying that “instead of driving big cars, they now drive big vans.” Malaysia is Southeast Asia’s second largest oil producer after Indonesia. The market is also nervously watching events in Nigeria, where a nationwide strike to protest higher fuel prices began yesterday, shutting down most of Lagos, Nigeria’s commercial capital. Militants smashed car windows to keep people home and streets nearly void of traffic except soldiers and anti-riot police in armored vehicles.
A spokesman for London-based Royal Dutch/Shell Group, which produces nearly 1 million barrels per day in Nigeria, said the strike has not hampered its output.
The strike takes place amid threats by a popular rebel leader’s pledge to take back the rich Niger Delta oil fields if peace talks with the government fail. Nigeria pumps about 2.5 million barrels per day and is the fifth-largest source of US imports.
Nigeria’s day-old general strike will continue into a second day as planned, the country’s top labor leader said yesterday, after talks with government officials failed to reach an agreement on lowering fuel prices.
“The strike continues tomorrow,” said Adams Oshiomhole, president of the Nigeria Labor Congress, after leaving the inaugural meeting of a new committee set up to find a way to protect consumers from rising petrol prices.