By Grant Smith
December 8, 2006
SourceDec. 8 (Bloomberg) -- Crude oil gained for a second day after militants in Nigeria threatened further attacks against foreign companies operating in the country, Africa's largest oil producer.
The attack came a week before the Organization of Petroleum Exporting Countries meets in Nigeria, where it will consider its second cut in production this year. The prospect of more violence in Nigeria and another reduction in OPEC output helped to push Brent crude, the benchmark for two-thirds of the world's oil, to its biggest gain this month.
``Attacks in Nigeria look like they'll continue, and that's always a cause for concern,'' said Robert Montefusco, a broker at Sucden (U.K.) in London.
Crude oil for January delivery climbed as much as $1.11, or 1.8 percent, to $63.60 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The Brent contract for January settlement on London's Ice Futures Exchange rose as much as 1.33 cents, or 2.13 percent, to 63.905 a barrel.
Nigerian militants abducted four workers yesterday from a pumping station run by Eni SpA, Italy's biggest oil company in the Niger River, and vowed to step up their campaign. Such incidents have slashed Nigerian output by about a quarter, or 500,000 barrels a day, this year.
``The time for warnings is over,'' Jomo Gbomo, a spokesman for The Movement for the Emancipation of the Niger Delta, said today in an e-mailed statement. MEND is the main rebel group operating in the region. ``Any persons having dealings with oil companies in the delta stand a good chance of being a victim in our attacks.''
Brent Gains
Nigeria's crude varieties are priced in relation to the main oil grades pumped from the North Sea, such as Brent. Disruptions to Nigerian supplies can cause the price of Brent contracts to rise faster than contracts traded on the New York Mercantile Exchange, as they did today.
Those gains accelerated after a report that daily shipments of North Sea Brent crude oil, which forms part of the Brent benchmark, will drop 41 percent next month from this month. Tankers will load 158,065 barrels a day in January, down from 267,742 in December, according to the loading program of Royal Dutch Shell Plc.
OPEC Meets
Next week, OPEC is due to meet in Abuja, the capital of Nigeria. At a meeting in October, OPEC, which pumps 40 percent of the world's oil, decided to trim 1.2 million barrels, or 4.4 percent, of its daily output beginning Nov. 1 to bolster prices.
OPEC ``justifies the possibility of cuts by inventory levels, not the prices,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. ``OPEC has been complaining about the excess supplies and that has to be on the back of investors' minds.''
U.S. oil stockpiles held 339.7 million barrels on Dec. 1, 14 percent more than the five-year average for the period, the Energy Department reported Dec. 6.
OPEC needs to restrict output further because a plunging dollar has cut the value of oil, OPEC president Edmund Daukoru said Dec. 4. Oil is priced and sold in dollars.
``There is a chance they will cut output, especially since they haven't held to the earlier cuts,'' said CFC Seymour's Kowalczyk. ``It may only be about 500,000 barrels.''
OPEC's crude basket price, a weighted average of 11 blends produced by the group's members, fell 44 cents to $58.66 a barrel yesterday.
A supply decrease is ``by no means nailed in,'' said BNP Paribas' O'Callaghan. ``Now that prices are in a slightly more elevated position, it puts OPEC in a more difficult position.''
Daily OPEC output fell by an average 550,000 barrels a day last month to 28.82 million barrels, according to a Bloomberg News survey, decreased by less than half the amount pledged on Oct. 20.
To contact the reporter on this story: Grant Smith in London at
gsmith52@bloomberg.netLast Updated: December 8, 2006 09:33 EST