Oil prices steady at mid-US$117 a barrel, near overnight record

The Associated Press ,  Singapore   |  Tue, 04/22/2008 5:32 PM  |  Business

Oil prices steadied Tuesday in Asia near a record overnight close above US$117 a barrel, supported by concerns about instability in crude supplies from some producers.

A Royal Dutch Shell PLC joint venture in Nigeria said Monday it may have to cut crude deliveries some 169,000 barrels a day in April and May because militants sabotaged a pipeline last week in the country's south.

The company, Shell Petroleum Development Co., declared force majeure on its April and May oil delivery contracts from its 400,000-barrel-a-day Bonny fields, effective April 22, a move that protects it from litigation if it fails to deliver on contractual obligations to buyers.

Militancy and lawlessness has grown in recent years in Nigeria's south, and attacks on oil infrastructure have become common.

"The disruption in Nigeria with Royal Dutch Shell is serious," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"It is light, sweet crude, which is much desired by the U.S. market during the summer gasoline season, so that certainly has affected the market," Shum said.

Nigeria is a major supplier to the United States. Attacks there in the past two years have cut nearly a quarter of the African country's oil output.

Light, sweet crude for May delivery rose 5 cents to US$117.53 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. On Monday, the contract hit an all-time high of US$117.83 a barrel.

In the floor session, it rose 79 cents to a record finish of US$117.48 a barrel. The May contract expires at the end of trading Tuesday.

Crude oil also rose Monday after the 150,000-ton tanker Takayama was attacked off the coast of Yemen as it headed for Saudi Arabia.

Kyodo News agency reported that the Japanese tanker was fired on by a rocket launcher from a small boat. None of the ship's 23 crew members was injured, the company said, but hundreds of gallons of fuel leaked before a 1-inch hole in the tanker's stern was repaired.

Other supply developments also factored into the market.

In Mexico, oil production slipped 7.8 percent in the first quarter to 2.91 million barrels a day as output at the country's traditional oil fields wanes, state oil company Petroleos Mexicanos said.

In Scotland, workers at Ineos PLC's 196,000 barrel-a-day Grangemouth refinery and petrochemical plant have threatened to strike for 48 hours from April 27 over changes to an employee pension plan.

The weak U.S. dollar has continued to support oil prices despite strengthening some this week against the yen and euro. Commodities such as oil and gold are still attractive hedges to investors seeking hedges against further drops in the currency.

In other Nymex trading, heating oil futures rose 0.86 cent to US$3.32 a gallon (3.8 liters) while gasoline futures lost 1.06 cents to US$2.9685 a gallon. Natural gas futures rose 0.9 cent to US$10.724 per 1,000 cubic feet.

In London, Brent crude futures added 12 cents to US$114.55 a barrel on the ICE Futures exchange. (**)

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