Oil Prices Firm--For Now
CNBC Senior Commodities Correspondent & Personal Finance Correspondent
This post is from CNBC energy producer Judy Gee.
Another round of supply fears helped keep oil in record territory, after prices in electronic trading hit a new all-time high: just 7 cents shy of $120 a barrel. The markets reacted to "expected" supply disruptions in Nigeria to the North Sea, despite already having priced it in last week.
In Nigeria, Exxon halted about 770k bpd, nearly all of its oil production in the region on a workers' strike that began Friday. The loss brings about 1.3 million bpd offline, which is equivalent to more than half of the output in Africa's largest exporter.
Meanwhile, in the North Sea, the Forties pipeline that delivers 700k bpd of oil, or roughly a third of North Sea oil to U.K. refineries, halted production in response to the weekend strike at the Grangemouth refinery in Scotland.The Forties pipeline began shutting down last week, and officials confirmed the closure Friday.
The key word here, of course, is "Friday" because one would have to ask why prices jumped to a new all-time high overnight when the news was anticipated and already priced into trading last week. It's also worth mentioning that the record came as the dollar bounced off last week's lows and rallied.
Both the Forties and dollar developments "could possibly induce a correction in energy prices later in the week," according to MF Global's Ed Meir. But still, the trend appears higher and Meir expects oil prices to continue to remain firm at least until the middle of the week, when the strikes are expected to end, and when the Fed is expected to meet.
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