- The Washington Times - Monday, February 20, 2006

LONDON (AP) — Oil prices rose more than $1.50 a barrel yesterday in response to violent militant action against oil pipelines in the Niger Delta that led to a 20 percent cut to Nigeria’s oil production.

Militants attacked a Shell oil-operated pipeline switching station and a boat, vowing to spread their campaign across the petroleum-rich south from where most of the African oil giant’s crude is pumped. The group took nine foreign oil workers hostage over the weekend.

The latest violence didn’t cause further production cuts but sent oil prices higher.

April Brent crude futures rose $1.59 to $61.48 a barrel on London’s ICE Futures exchange. Trading on the New York Mercantile Exchange was closed for the Presidents Day holiday. Oil prices had jumped more than $1 and settled near $60 a barrel Friday because of supply concerns.

Nigeria is reeling from the attacks in which militants blasted oil and gas pipelines and sabotaged a key oil-loading terminal belonging to Royal Dutch Shell PLC, forcing the company to halt the flow of about 455,000 barrels a day.

The West African nation is Africa’s leading oil exporter and the United States’ fifth-largest supplier, usually exporting 2.5 million barrels daily.

Concerns over Nigeria’s oil supply and the frequent attacks on oil installations have the potential to lift prices back to the high-$60-a-barrel region, said Sucden Commodity brokers. “Despite the current glut of crude oil from the oversupply, the lack of spare production capacity has the market on edge.”

Alex Scott, senior research analyst at Seven Investment Management, said these events potentially put the focus back on the supply side, with the understanding that a large portion of oil supply is in high-risk countries.

Insurgents set a target last month to cut oil output by 30 percent by the end of February, which no longer seems impossible, Barclays Capital said.

“We expect that Nigeria will continue to be a major issue in terms of supply security up to and probably beyond next year’s elections.”

Insurgent violence in Iraq also has increased over the past few days, with sabotage to northern Iraqi oil installations halting exports of 400,000 barrels a day.

The country produces about 2 million barrels a day, which is down by about 800,000 barrels from before the U.S.-led invasion.

Brokers said a lack of liquidity in the market because of the U.S. holiday exaggerated yesterday’s price rally.

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