Oil Hits Two-Month High Of US$67.90View larger imageFile photo©...

Oil Hits Two-Month High Of US$67.90
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04/04/2006
ReutersOil touched a two-month high as investment funds poured cash into commodities, 23 percent of Nigerian oil output remained idle and US refiners geared up for peak gasoline demand.

Commodities prices rose across the board, with copper and zinc hitting record highs and gold at a 25-year high as new institutional money flowed in at the start of the new quarter.

US crude oil settled 11 cents higher at US$66.74 a barrel, after hitting US$67.90, its highest since Feb. 1. London Brent settled 93 cents higher at US$66.84 a barrel after touching a seven-month high of US$67.93.

"Another surge of new money is coming into the commodity markets," said Mike Wittner of Calyon.

The loss of 550,000 barrels per day of Nigerian oil in rebel attacks has coincided with growing demand from refiners in the United States, consumer of 40 percent of the world's gasoline.

"The loss of critical Nigerian barrels just as US refiners are returning from maintenance has established a US$60 floor (for US crude) and threatens to re-test the all time high of US$70.85," analysts at PFC Energy wrote in a note.

Nigerian Minister of State for Petroleum Edmund Daukoru said the biggest foreign operator, Royal Dutch Shell, would restart its offshore 115,000 bpd EA field in days.

Shell declined comment. There was no sign of its more important onshore 340,000 bpd Forcados oilfield restarting.

Oil industry and military officials in Nigeria said on Sunday that Shell was reluctant to send its staff back into the violent southern delta region despite more naval patrols there.

Deutsche Bank noted many analysts expected attacks on Nigeria's oil industry to continue in the run-up to the presidential election early next year.

US oil hit a US$70.85 record high last September after hurricanes knocked out a big chunk of Gulf of Mexico refining and oil and gas production.

Analysts say another active US hurricane this year could strain the oil market still further.

OPEC

OPEC ministers will meet informally during talks between oil consumers and producers in Qatar starting April 22, OPEC's acting secretary general, Mohammed Sanusi Barkindo, said in Abuja. OPEC's next full ministerial meeting is in June in Venezuela.

The group, which accounts for over half the world's oil exports, appears powerless to bring prices down. Daukoru, who is also the OPEC president, said he expects the production group to keep official output at a near-maximum 29 million barrels per day.

Asked if he expected OPEC to cut its output ceiling, Daukoru said: "Not at this price level. Honestly I don't see it."

That jibed with comments by Qatari Oil Minister Abdullah al-Attiyah at the weekend. "We are doing all that we can do ... to stabilize the oil market," he said on Sunday.

PFC Energy analysts agreed. "Unless the Nigerian outages can be fixed, OPEC will be in a bind again," they wrote.

Attiyah said he believed the global economy could absorb US$60 a barrel crude, the latest indication that OPEC was unlikely to allow prices to fall back sharply.

The head of Algerian state oil firm Sonatrach said prices were likely to remain high for the time being.

"There is a consensus based on market fundamentals that a sustained price will be maintained in the short term," Sonatrach Chief Executive Mohamed Meziane said in Algiers.