Oil: Nigeria tensions push oil to US$60

NEW YORK - Oil rose back near US$60 a barrel on Friday as fighting escalated in Nigeria between government forces and militants, raising fears of a supply disruption from the eighth largest crude exporter.

US crude CLc1 oil futures settled up US$1.42 to US$59.88 a barrel, the second day of gains, while London Brent crude LCOc1 climbed US$1.10 to US$59.89.

The strength came after Nigerian government helicopters attacked targets in the Niger Delta and militants fired back with rockets, the first major face-off since the militants staged attacks on the oil industry last month.

"Traders are worried that if this situation deteriorates, supply from Nigeria would be at risk," said Mark Waggoner, president of Excel Futures in California.

The militants, who say they are fighting for greater control of oil resources in the Opec-member nation, kidnapped four foreign oil workers for 19 days in January and carried out a series of attacks that cut oil output by 10 per cent.

Adding support to oil prices, dealers eyed simmering tensions between the West and Iran over the country's nuclear ambitions. There was also the prospect of tighter petrol supplies when the US driving season begins.

Energy players have expressed concern that potential international sanctions on Iran could hinder crude shipments, or lead Tehran to withhold exports in protest.

"Geopolitical tension is never far below the surface ... The situation with Iran has not run its course and it is far from clear how it will turn out," said Damien Cox, analyst at John Hall Associates.

The gains in oil prices put an abrupt end to a 15 per cent slide since late January that was triggered by swelling inventory levels in the United States.

US oil supplies have grown to their highest since June, while petrol stockpiles have climbed to the highest since 1999, when energy prices were near historic lows.

Some analysts predict the US petrol glut could be short-lived, however, as heavy refinery maintenance this spring tightens supplies before drivers hit the roads in greater numbers for summer vacations.

Experts were also concerned that Opec could step in with a production cut if prices get too low.

Opec President Edmund Daukoru, who is also Nigeria's Minister of State for Petroleum, said on Friday it was too early to say whether the exporters' group would cut oil output at its next meeting in March.

"It is a little too far ahead to predict what (the market) will do," said Daukoru.

Opec-member Venezuela called on Thursday for a cut of up to one million barrels per day at the meeting.

- REUTERS