Nigeria supply fears push IPE Brent back over $75/barrel

London (Platts)--25Jul2006

IPE Brent futures surged over the $75/barrel level again as output fears
in Nigeria mounted following Monday's rupture in the 180,000 b/d Bonny Light
pipeline and on a stream of US refinery glitches, brokers said Tuesday.
The front-month September Brent futures contract was trading 41 cents
higher on Monday's close at $74.89/barrel and shy of the intra-day high of
$75.41/barrel.
Prices rallied sharply into Monday's close with the front-month September
futures contract gaining around $1.50/barrel in the last three hours of
trading having spent much of the day in negative territory. "A lot of people
were expecting a more bearish outlook but then the Nigeria news broke and lots
of traders got caught out," one broker said.
One European oil major was a heavy buyer of the September/October spread,
helping drive the value higher by around 30 cents from the previous day,
brokders said. The spread closed out Monday at minus 26 cents in contango and
was trading around this level at 1208 GMT.
The Nigerian pipeline rupture comes on the back of existing output
problems from the oil-rich producer. In June, Nigerian oil production climbed
50,000 b/d to 2.35 million b/d, partly offsetting the 500,000 b/d of
production shut in since earlier this year due to militant attacks.
As Nigeria's crude production is largely light sweet, it is attractive to
refiners since it has a relatively high gasoline yield and any output
disruption can push oil prices sharply higher.
"With limited spare capacity throughout the supply chain, oil prices are
responding dramatically to every threat of supply disruption," the Centre of
Global Energy Studies said Monday in the July report, adding that rising
demand from refiners in the third quarter was expected to keep oil prices
strong, while "geopolitical and weather-related concerns" would add
volatility.
Elsewhere, China imported 11.79 million mt of crude in June this year, up
4.8% from the same month of 2005, customs data showed Tuesday. However,
month-on-month June crude imports were down 4.8% from the 12.39 million mt
recorded in May, the Chinese General Administration of Customs reported.
China spent a total $5.8 billion on its crude imports in June, up 45% on
the year, amid record high oil prices.
In the US, ConocoPhilips and Valero suffered production glitches at two
plants but it was not expected that the outages would be long lasting with
ConocoPhilips saying that output would be restored by July 31.
--Paul Wightman, paul_wightman@platts.com

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