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Oil Prices Settle Above $141 Amid Production Threats

Reuters
Thursday, 10 Jul 2008 | 4:17 PM ET

Oil prices jumped nearly $6 to above $141 a barrel Thursday amid threats to production in Nigeria and Brazil and as additional missile tests by Iran escalated tensions with the West.

Further support came from the weak dollar, which fell on renewed credit worries after capital concerns dragged down shares in major mortgage finance sources Fannie Mae and Freddie Mac.

U.S. crude settled up $5.60 at $141.65 a barrel, off a session high of $142.10 a barrel. London Brent crudesettled $5.45 higher at $142.03 a barrel.

The Movement for the Emancipation of the Niger Delta, the main militant group in Nigeria's oil-producing Niger Delta, said it was abandoning a cease-fire to protest a British offer to help tackle lawlessness in the region, raising concern of further disruptions to the OPEC nation's exporters.

"The cease-fire in Nigeria is ending on the 12th, and that's creating some jitters as far as supply is concerned,'' said Rob Kurzatkowski, futures analyst with optionsXpress.

Rebel attacks on oil infrastructure in Nigeria, the world's No. 8 exporter, have helped push crude prices to record highs over $145 this month, adding to a 40 percent rise in prices this year.

Concerns that tensions between Iran, another OPEC member, and the West over Tehran's nuclear program could lead to an oil supply disruption have added to bullish sentiment.

Iran tested more missiles in the Gulf on Thursday, state media said, and the United States reminded Tehran that it was ready to defend its allies.

But a U.S. official said there was no information of a rumored third Iran missile test late Thursday. There was no mention of a third test on Iranian satellite channels Press TV or Al Alam on their broadcast Thursday evening.

Workers at Brazil's Petrobras threatened to launch a five-day strike for next week that would affect all 42 Campos basin offshore platforms, which account for more than 80 percent of Brazil's oil output of around 1.8 million barrels per day.

Further support came as the dollar slipped against other currencies. Investors have flocked to oil and other commodities this year as a hedge against rising inflation and the weak greenback.

High fuel costs have battered consumer economies this year, driving down demand and causing global fuel protests, after surging growth in demand from emerging economies like China sparked a 6-year rally in oil prices.

The International Energy Agency on Thursday forecast pressure on oil markets could ease next year as demand growth slows, cutting the need for crude from the Organization of Petroleum Exporting Countries.

"We do see the potential for a build in spare capacity in 2009. That should help to improve the situation," Lawrence Eagles of the IEA said, adding a pledge from OPEC kingpin Saudi Arabia to increase output this year could help provide more of a cushion for the market.

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