OilVoice - Production Disruption in Nigeria Causes Oil Price Fall

Production Disruption in Nigeria Causes Oil Price Fall

18 July 2008

The price of crude oil took an unscheduled fall to its lowest in more than a month, yesterday in New York, after a disruption to production in Nigeria. The price of a barrel fell $5.31, or 4 percent, to close at $129.29, the lowest on the New York Mercantile Exchange (NYMX) since June 5. It traded at $130.77 at 2:54 p.m. Singapore time.

Eni SpA, Italy’s largest oil company, reported that production of 47,000 barrels a day in Nigeria had been suspended after an ‘unforeseen drop in pressure’ on pipelines leading to the Brass export terminal.

Standard & Poor’s 500 Index futures expiring in September dropped 8.30 points, or 0.7 percent, to 1,245.10 as of 8:50 a.m. today in Sydney. Dow Jones Industrial Average futures also lost 64 points, or 0.6 percent, finishing up at 11,337.

Despite the drop the 12-month average for New York futures remained true to form rising above $100 a barrel today. In the continuing trend of rising oil prices, futures are up 74 percent on figures this time last year.

Toby Hassall, an analyst at Commodity Warrants Australia, said: “The market is sensitive to any real or potential supply disruptions.

“At current price levels, it’s seen as a good opportunity to buy back as supply bottlenecks are still a concern.”

Oil also gained as U.S. stock-index futures retreated after Google Inc, Merrill Lynch & Co. and Microsoft Corp. failed to meet analysts’ profit estimates and fell by more than 6 percent, prompting investors, concerned by an uncertain market, to buy commodities.

Commenting upon yesterday’s price fluctuation Anthony Hunan, Assistant General Manager for risk management at Mitsubishi Corp. in Tokyo, said: “There’s potential for a downside follow-through in prices, but the market will eventually find a bottom, maybe at $120.”

In another breath he forecasted the potential collateral of continued disruptions by saying: “If anything happens to supply, $170 to $190 a barrel is possible.”

He speculated that at $190 a barrel motorists would again find themselves in the firing line with gasoline prices likely to match those during the 1980-1981 oil crisis, the last time there was a large and sustained loss in oil demand.

Meanwhile yesterday, the International Monetary Fund (IMF) raised its forecast for global economic growth this year. The projected figure rose to 4.1 percent for the year, higher than the 3.7 percent predicted back in April.

Crude oil is expected to fall again next week as supplies increase and slowing economic demand curbs fuel use in the world’s largest energy-consuming nation, the U.S. Despite this, Goldman Sachs Group Inc., Wall Street’s most profitable bank, said that its $149 a barrel year-end price target for crude oil was on course as inventories remained ‘extremely low’ and the market remained vulnerable to supply shocks.