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Experts
predict $60 oil price by December
By Mojeed Jamiu
Finance
Editor (with
agency report)
Nigeria is likely to continue
to reap additional extra budget fortunes from the liquid gold far into the
horizon as there are indications that the price of crude oil could hit the
$60 watermark by December.
Excess earnings from the
windfall in soaring prices on the international market boosted government
coffers by over N600 million as of the end of August alone.
Strong demand through the end
of the year is expected to further tighten supplies and capacity, Jason
Kenney, an analyst at ING Financial Markets in Edinburgh said at the
weekend.
�A terror outrage that takes
out supply from the market could send prices bursting through $60 and
beyond�, he said. They were up more than $10 per barrel (pb) in the past
month.
Crude prices rose to a record
for a sixth day on Friday, reaching $54.45 pb in New York, after the
International Energy Agency (IEA) said demand this year is rising faster
than expected, increasing concern about United States� supplies.
Nigeria, the fifth-biggest
supplier of crude to the U.S., produced 2.42 million barrels per day (bpd)
last month. The country�s Bonny Light crude is the sweet type, which U.S.
refiners prefer.
Prices also gained by the
general strike that was suspended last week in Nigeria, Africa's top oil
producer. While some oil workers joined the strike, their unions said they
would not target oil output. Shell said production at its venture in
Nigeria, the country's biggest producer, was not affected.
World oil use is expected to
jump by 2.71 million bpd to 82.4 million bpd this year, the IEA said in a
monthly report, up 190,000 bpd from what it predicted last month. The
agency cut its forecast for 2005 demand growth because oil prices, up by
as much as 66 per cent this year, will restrain world economy.
Crude oil for November
delivery was at $54.04 pb in electronic trading on the New York Mercantile
Exchange at 12:37 p.m. in London, up 0.8 per cent at the weekend and 26
per cent since Hurricane Ivan forced Gulf of Mexico producers to cut
output. Storm damage has reduced U.S. pumping in the region by at least a
quarter for a month and imports have slowed.
November Brent crude climbed
to a record $51.50 pb and was up 34 cents at $51 pb on London's
International Petroleum Exchange, capping a 69 percent gain this year.
The biggest U.S. import
terminal is unloading oil at a reduced rate. Much of the Gulf production
is so-called sweet crude, with low sulfur, the kind refiners prefer to
produce heating oil and gasoline. Heating oil supplies were 11 percent
below the average for the time of year on October 1.
``Since supply is capped, the
market is now looking for a price at which the U.S. is able to attract
enough sweet crude,'' said Frederic Lasserre, head of commodities
economics research at Societe Generale in Paris. ``The market is also
trying to discover the price at which demand will really slow
down�.
``There are big supply
shortages,'' said Richard Lewis, a broker for Refco Group in London. ``We
are still seeing problems with imports in the U.S. and we need the strikes
in Nigeria to ease off before we see some selling�.
Another storm shut the
Louisiana Offshore Oil Port, which handles about 1 million bpd, on October
8. While unloading resumed two days ago, the biggest tankers cannot
discharge until a booster station is repaired, said Mark Bugg, Scheduling
Manager at New Orleans-based Loop LLC, the port operator. The station
should open in ``a couple of days,'' he at the weekend.
The port has shut three times
in a month because of Hurricane Ivan and the latest storm.
The unexpected duration of the
Gulf shutdowns means demand for winter heating fuels will begin to rise
toward its annual peak before supplies at U.S. refineries return to
normal.
The Paris-based IEA cut its
forecast for growth in demand next year by 320,000 bpd to 1.45 million,
saying record prices will restrain economic growth.
The current surge in prices
has been heightened by a mismatch between the type of crude the
Organisation of Petroleum Exporting Countries (OPEC) is producing and the
needs of oil refiners, the IEA said. So-called sour crude contains more
sulfur than sweet grades and is harder to refine into fuels. The
disruptions in the Gulf of Mexico have reduced supplies of sweet crude.
``The marginal barrel entering
the market is heavy and sour. With refinery throughputs running at
capacity to meet surging demand, the incremental barrel of refining
capacity seeks lighter, sweet crude to maximise distillate and minimise
fuel oil production�, the IEA said.
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