AP Worldstream: Fresh unrest in Saudi Arabia, Nigeria push crude prices up as supply fears reappear (ShellNews.net) 7 Dec 04

YEOH EN-LAI

Dec 07, 2004

A militant attack on the U.S. consulate in Saudi Arabia and unrest in Nigeria helped push crude prices upward Tuesday, as supply fears crept back into play and traders considered a potential production cut from oil cartel OPEC.

Mid-afternoon in Asia, crude futures in after-hours electronic trade on the New York Mercantile Exchange were up 5 cents to US$43.03 from the overnight close. Monday's closing price was 44 cents higher than last week's - where per-barrel prices were the lowest in 3 months.

Crude was up 21 cents to US$43.19 earlier in the Asian session.

Heating oil, meanwhile, stood at US$1.2520 per gallon (3.8 liters) in Asia Tuesday.

"There is impact from the attacks in Saudi Arabia but more importantly, the market is looking at OPEC members asking to stick to quotas," said Esa Ramasamy, oil editorial manager for energy reporting agency Platts.

Oil cartel OPEC meets in Cairo on Friday to outline its first quarter 2005 directions and several members have been calling for a cut in already-record production to prevent prices from falling further.

The cartel, including Iraq, is pumping out at a record 30 million barrels daily, and several member nations have expressed concern at the figure, citing oversupply and lower crude prices.

While the price of crude on the Nymex is about 40 percent higher than a year ago, it is more than US$10 lower than the record settlement of US$55.17 set twice in late October.

Petroleum prices have been high all year due to strong global demand, a tight supply cushion and fears of output disruptions in Iraq, Nigeria and Russia. In September, a strong hurricane knocked out significant oil production in the Gulf of Mexico, though the region's output is now recovering.

In Jiddah, Islamic militants lobbed explosives and charged the U.S. consulate on Monday in a three-hour assault blamed on al-Qaida. Nine people were killed, including three attackers.

It was the first major attack by extremists in the world's largest crude producer since May, and analysts fear it was the first of more to come.

Elsewhere:

_ Nigerian unrest threw nearly 100,000 barrels of crude off-line as protesters besieged oil platforms run by Royal Dutch/Shell Group Cos. and ChevronTexaco Corp. for a second straight day.

_ A gas leak shut down production at Statoil ASA's Snorre A platform in the North Sea, resulting in a loss of 205,000 barrels of oil a day in production.

Ramasamy said the impact from Saudi Arabia and Nigeria was not likely to be extended unless there were fresh reports of unrest. Instead, he said traders were more focused on the midweek U.S. petroleum inventories report and Friday's OPEC meeting.

The recent rise in U.S. crude and distillate stocks just before the Northern Hemisphere winter has been the catalyst in sending prices into a downward spiral since late October. A cold winter is likely to put pressure on distillates, which include heating oil, diesel, jet fuel and kerosene.

"It's still early and there's a lack of direction," said Ramasamy. "Weird weather patterns ... We still don't know if it's going to be very cold or not."