Oil Settles Below $69 as Nigerian Strike Concerns Ease
Oil prices slipped below $69 a barrel Thursday after a report that a strike in Nigeria hasn't affected oil exports from Africa's largest crude producer alleviated the market's supply concerns.
Light, sweet crude for August delivery dropped 21 cents to settle at $68.65 a barrel on the New York Mercantile Exchange. Brent crude for August delivery lost 20 cents to finish at $70.22 a barrel on the ICE Futures exchange in London.
Gasoline futures, however, ended higher at $2.2467 a gallon, up 1.86 cent.
Retail gas prices continued their decline from late-May record highs. The AAA said the national average price for unleaded gasoline was $2.996 a gallon Thursday, down from $2.998 a gallon Wednesday and $3.209 a month ago.
According to Dow Jones Newswires, traders of West African crude oil said Nigerian supplies are unaffected by the strike so far, with exports proceeding normally. The news service also said the Nigerian government was meeting with union representatives to discuss the strike and union demands.
Nigeria's labor unions launched a strike Wednesday aimed at overturning government price increases on gasoline, among other demands that the government already has conceded.
"Is it a bearish headline? Yes, it is because the bulls are expecting to see a halt in loading and a drop in production," said Tim Evans, an energy analyst at Citigroup Global Markets. "They're hoping to see a seven as the first number on the oil price. That story doesn't reinforce any of their hopes."
Earlier Dow Jones reports Thursday said production and loading of crude oil for export have been disrupted by the strike, citing a union leader.
The development followed a directive by Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, to its members to shut down both production and loading facilities by midnight Wednesday, as part of the union's efforts to force the government to meet its demands.
Mobil Producing Nigeria Unlimited, a unit of Exxon Mobil, and union members at Royal Dutch Shell had complied with the directive, according to the union leader.
"Initially, the market was up on Nigeria, but it didn't have enough chutzpah to get us through $70 a barrel," said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. "As the day wore on with no new news long traders walked away with profits."
Flynn said, however, there's still some uncertainty about how long the strike could last, especially with a new president in place. A prolonged strike could potentially stop about 2 million barrels a day of oil production, boosting crude oil prices, analysts said.
Meanwhile, heating oil futures lost 0.92 cent to settle at $2.0247 a gallon while natural gas prices fell 4.3 cents to finish at $7.348 per 1,000 cubic feet.
Nymex prices had fallen Wednesday on larger-than-expected builds in U.S. stockpiles of crude oil and gasoline, which seemed to assuage the market about the U.S. refining industry's ability to satisfy peak summer demand. The concerns have been fed by an unusually large number of refinery outages.
The U.S. Energy Information Administration said Wednesday that crude inventories jumped by 6.9 million barrels in the week ended June 15. Analysts had expected crude stocks to drop by 150,000 barrels. Gasoline inventories rose by 1.8 million barrels, more than the 1 million barrel increase expected by analysts surveyed by Dow Jones Newswires.
Refinery utilization fell 1.6% to 87.6%. Analysts had expected utilization to grow 0.6%.
Distillate inventories, which include heating oil and diesel fuel, grew by 100,000 barrels per day. Analysts had expected a 900,000 barrel-per-day increase.