Oil: Price rises after Nigeria attacks

Oil rose more than a dollar after militant attacks shut in a fifth of Nigeria's oil supply.

US crude futures for March delivery rose $1.22 to $61.10 a barrel. The New York Mercantile Exchange (Nymex) was closed on Tuesday for the US Presidents Day holiday.

London Brent crude was up 6 cents at $61.60 a barrel. On Tuesday, the contract gained $1.65.

"The rally is based on the Nigeria attacks," said Alexandre Kervinio, analyst at SG CIB Commodities in Paris. "It is quite a significant amount. The market was used to Nigerian outages, but these attacks appear to be gathering speed and are much more worrying." Militants knocked out 19 per cent of supplies from the world's eighth largest crude exporter Nigeria by attacking a major tanker terminal and blowing up a pipeline over the weekend.

The attacks have forced Royal Dutch Shell, the biggest foreign operator in Opec member Nigeria, to suspend 455,000 barrels per day of output.

The attacks have hit both Nigeria's crude export and its internal fuel supplies.

Attacks on a gas pipeline at the weekend forced Nigeria to cut power generation by 30 per cent, the state power firm said.

January attacks on a pipeline feeding key refineries have cut domestic fuel supplies and forced Nigeria to buy petrol cargoes on international markets.

The militants want more local control of the Niger Delta's vast oil wealth. Nigeria is a key oil supplier to the United States, the world's largest oil consumer.

"We continue to question how close the situation now is to either complete company withdrawal from the area or a strike by workers due to the obvious lack of security," said Barclays Capital in a report.

"Either way, we expect this story to run for many more months, at times taking very significant tranches of output offline." In Ecuador, state oil firm Petroecuador resumed pumping oil through its Trans-Ecuadorean pipeline late Monday, after declaring force majeure and suspending crude exports due to violent protest in Napo province.

A company spokesman said the force majeure declaration could be lifted in two days.

Adding to support for prices was concern that producer group Opec could cut output when it next meets in March.

Opec member Kuwait's Oil Minister Sheikh Ahmad al-Fahd al-Sabah said on Monday the market would have a surplus supply of 2 million barrels per day (bpd) in the second quarter.

Iran's Deputy Oil Minister Mohammad Hadi Nejad-Hosseinian said he expected demand for Opec crude to drop by about 2 million bpd to 26 million bpd in the second quarter.

Opec is due to meet on March 8 to discuss output policy.

Traders also continued to watch the row over Iran's nuclear ambitions closely, they said.

Nejad-Hosseinian also said Iran would not hold back its vital oil exports as a weapon in its nuclear dispute with the West.

- REUTERS