Oil futures prices advanced to a new high yesterday as a strike began in Africa’s largest exporter of crude, exacerbating global-supply concerns at a time of strong demand and reduced output in the hurricane-ravaged Gulf of Mexico.
Worries about Russian oil supplies also persist as oil giant Yukos, already struggling to repay a huge back-tax bill, got slapped yesterday with $1.34 billion in fines.
Crude for November delivery rose 33 cents to $53.64, surpassing Friday’s record settlement price of $53.31 on the New York Mercantile Exchange.
On London’s International Petroleum Exchange, Brent crude futures for November delivery rose 95 cents to close at $50.66 per barrel.
While oil prices are about 80 percent higher than a year ago, they are more than $26 below the peak inflation-adjusted price reached in 1981.
Underlying market jitters is the fact that excess available output is scant, with global production capacity only about 1 percent above the daily supply of 82 million barrels. Demand rose faster than expected this year, particularly in China and India, catching many in the industry off guard.
In Nigeria, a nationwide strike to protest higher fuel prices began yesterday, shutting down most of Lagos, Nigeria’s commercial capital. Militants smashed car windows to keep people home and streets nearly void of traffic except for soldiers and anti-riot police in armored vehicles.
A spokesman for London-based Royal Dutch/Shell Group, which produces nearly 1 million barrels per day in Nigeria, said the strike has not affected output. The strike is only supposed to last four days.
“It may wind up being something bigger; we just don’t know yet,” said Ed Silliere, vice president of risk management at Energy Merchant Corp. in New York.
The strike takes place amid threats by a popular rebel leader’s pledge to take back the rich Niger Delta oil fields if peace talks with the government fail. Nigeria pumps about 2.5 million barrels per day and is the fifth-largest source of U.S. imports.
The market is also closely monitoring the slow recovery of production in the Gulf of Mexico, where 17 million barrels of oil production have been lost since Hurricane Ivan battered the region, according to the federal Minerals Management Service (MMS). About 475,000 barrels a day, or 28 percent of regional output, remains frozen because of damage.
Natural gas production in the region is 1.8 billion cubic feet a day, or 14 percent, below pre-hurricane levels, and a total of 74 billion cubic feet of output have been lost.
“It’s been a very, very slow process of getting back up to speed,” said Agbeli Ameko, managing partner at the Denver-based energy research firm Enercast.com.
A major problem is that 10 large pipelines in the region that transport oil and natural gas remain shut down, according to the MMS. Six production platforms awaiting repairs remain idle, the agency said.
“This is valuable production to the United States and it just couldn’t have come at a worse time,” said John Kilduff, senior analyst at Fimat USA in New York.
In Russia yesterday, a court ruled that Yukos must pay $1.34 billion in fines and penalties as part of a $4.1 billion back-tax claim for 2001, raising the company’s total liabilities to $7.5 billion. The company has warned repeatedly that its production could suffer as a result of the government’s aggressive pursuit of back taxes.