LONDON, 7 July 2004 — Oil prices soared to one-month peaks yesterday on rising supply fears after French group Total said it had suspended oil production in Nigeria, Africa’s largest exporter of crude, for security reasons.
The price of reference Brent North Sea crude oil for delivery in August climbed by 50 cents to $36.80 per barrel in late deals in London, the highest level since June 3.
New York’s benchmark contract, light sweet crude for August delivery, rose by 71 cents to $39.10 in early trading — also the highest point for one month — when the US market reopened after a long holiday weekend.
Oil group Total suspended production of oil and gas in Nigeria following problems with workers, a director of the company’s Nigerian subsidiary said yesterday. “We had to suspend production from Friday afternoon for security reasons,” Emmanuel Chiakana, development director at Elf Petroleum Nigeria, told AFP from Port Harcourt, in southern Nigeria.
“We have problems with staff and the situation is not healthy. We had to stop production. “We have a degraded situation. The shutdown of production is based on safety. Our staff are asking for career improvements. We are negotiating with the Minister of Labor,” he added. But a spokesman for the federal Ministry of Labor told AFP the minister had not been informed about the industrial dispute.
Prices had already been rising in recent days following weekend pipeline blasts in Iraq, a crisis at Russian energy giant Yukos and OPEC signals that it could postpone a planned output hike.
“People are still very nervous” about supply, Investec analyst Bruce Evers said. “There are positive noises coming out of OPEC about the price, you’ve got Yukos, Total in Nigeria, pipelines in Iraq... It is a very very volatile market at the moment.”
Saboteurs attacked a domestic oil pipeline near the city of Karbala in central Iraq on Sunday and were being seen as the likely cause of a rupture to a main southern pipeline that caused a fresh fall in exports.
Meanwhile, indications that Russia’s largest oil producer and exporter Yukos was being driven closer to bankruptcy faced with a $3.4-billion tax bill has also given markets a boost.
Ministers from the Organization of Petroleum Exporting Countries have said the organization could delay a scheduled production increase when it meets on July 21.
Faced with record high prices on world markets, OPEC announced on June 3 that it would raise production quotas by two million barrels per day on July 1, and by another 500,000 bpd on Aug. 1.
Traders said it was too soon to predict the outcome of the meeting.
“The higher the price goes, the more likely (it is that) OPEC is going to give us the extra oil after all,” GNI-Man Financial trader Robert Laughlin said. “But it all depends on the price when they go into their meeting. I don’t think that OPEC has committed to doing anything yet.”
