Oil: Nigeria exports in focus

Oil rose a dollar to US$75 a barrel on Thursday after Royal Dutch Shell said it could give no timeline for restoring lost Nigerian output and a drop in US petrol stocks pointed to vigorous demand in the world's top consumer.

Israel's bombardment of south Lebanon kept the market on edge that the 16-day-old conflict could hit exports from the Middle East, the region that pumps a third of the world's oil.

London Brent was up US$1.24 at US$75.24 a barrel at 1742 GMT - a rare premium to US oil because of the disruption to Nigerian exports. US crude rose 76 cents to US$74.70, down from a July 14 peak of US$78.40.

"Nigeria is the biggest driver right now" said fund manager Evan Smith of Texas-based US Global Investors.

"And obviously the situation in the Middle East does not look like it's going to wind down any time soon."

Shell, Nigeria's biggest foreign operator, said it could not predict when it would restore 653,000 barrels per day of output lost from fields it oversees.

Production in the world's eighth biggest exporter has been reduced a quarter, mostly by militant attacks.

"We don't think there will be significant production before the year-end," Shell Chief Executive Jeroen van der Veer said on a conference call.

A leak in a pipeline carrying oil from Nigeria's second biggest field, Bonny Light, forced Shell to declare force majeure on cargoes on Wednesday. An attack on an Agip flow station made a significant cut in the Italian firm's output as well.

US DEMAND

Prices also drew support from US government data showing a 3.2 million-barrel drop in petrol inventories, far deeper than the 200,000-barrel draw expected by analysts.

US petrol demand, which accounts for more than 40 per cent of global petrol consumption, is up 1.8 per cent from last year over the past four weeks, as US$3 a gallon pump prices fail to deter summer vacationers from taking to the roads.

"There have been a lot of expectations that demand would be tapering off with high prices, but we really haven't seen that coming through," said Gerard Burg, minerals and energy economist at National Australia Bank.

US crude oil inventories were unchanged from the previous week, maintaining a healthy surplus versus a year ago, while distillate stocks rose 800,000 barrels, less than expected.

Israel dropped bombs and fired shells at south Lebanon on Thursday, a day after foreign ministers pledged in Rome to work urgently for a "lasting, permanent and sustainable" cease-fire, disappointing Lebanon and others who want the war to stop now.

"There's a lot of geopolitical tensions in the world," Shell CEO van der Veer said. "Tension in the world usually means high oil prices."

Iran's Oil Minister Kazem Vaziri-Hamaneh said he believed it was unlikely that scorching world oil prices would cool down.

- REUTERS