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30 November 2023

Oil prices rally on supply fears

By Agencies


Oil prices rose strongly on Friday on supply disruptions in Nigeria, Africa's biggest exporter, and expectations of colder weather in key energy consumer the United States, traders said.


New York's main contract, light sweet crude for delivery in March, jumped $1.08 to $89.18 per barrel.


Brent North Sea crude for March delivery climbed $1.13 to $89.64.


"Prices are rising on back of Nigeria supply disruption," said Barclays Capital analyst Kevin Norrish.


"In addition, US weather forecasts indicated that temperatures in the (US) northeast would fall below normal next week leading to speculation that US (heating fuel) demand would rise."


Energy giant Shell said on Thursday it would not be able to honour all its export contracts from its southern Nigerian Bonny export terminal for the rest of February and March because of sabotage.


The company said it had not been able to repair three pipeline leaks on the Nembe Creek trunk because of "serious security challenges."


It did not give figures on the expected loss in production but industry sources estimate thousands of barrels of crude will be lost.


Shell is Nigeria's largest oil operator, accounting for around half of the country's daily output of 2.6 million barrels at peak production, but unrest in the Niger Delta has slashed production by a quarter since January 2006.


Shell has declared a force majeure, which allows companies to suspend contractual obligations such as deliveries of oil and gas following unforeseen events, without incurring penalties.


While supply worries boosted oil prices on Friday, rising crude inventories in the United States and fears that demand could fall should the global economy falter have seen prices slump by almost 12 per cent since striking historic highs above $100 a barrel in early January.


Prices closed down more than a dollar on Wednesday after the US government reported another rise in crude oil inventories amid mounting worries that demand for energy would fall owing to the weak US economy.


The US Department of Energy said American crude inventories had jumped by 7.0 million barrels in the week ending February 1, marking a fourth straight rise in stocks.


The increase was much higher than analysts' consensus forecast which had predicted a gain of just 2.2 million barrels.


US gasoline, or petrol, stockpiles increased by 3.6 million barrels, also beating market expectations calling for a 1.7-million-barrel rise. (AFP)