Oil prices set another record on Tuesday, pushing into uncharted territory above $50 a barrel as tension in Nigeria threatened to push petrol prices above the levels that caused fuel protests in 2000.
United States light crude futures rose to $50,47 a barrel in overnight trading, the highest price yet although allowing for inflation it is well below levels seen in the late 70s after the Iranian revolution. It later traded back down at $49,90, having failed to consolidate above the $50 mark.
North Sea Brent futures also set a record of $46,80 before settling down to $46,60, up 67 cents on the day.
Oil prices have risen more than 50% this year as surging demand from China, India and the United States has outstripped supply, in spite of production increases from the oil cartel Opec. Demand and supply are at their highest levels for a quarter of a century and the market is vulnerable to any disruption in output.
Prices receded late last month but have jumped again in the past few weeks after Hurricane Ivan disrupted supplies from the Gulf of Mexico and fresh fighting erupted between Nigerian government forces and rebels in the oil-producing south. The Niger Delta People’s Volunteer Force warned on Tuesday that foreign oil workers in the southern delta should leave the region ahead of a ”full-scale armed struggle” beginning on October 1.
That was enough to push oil prices to their new record. Nigeria pumps between 2,25-million and 2,5-million barrels per day (bpd) of world production that amounts to about 81-million bpd, so any closure in its oilfields could result in a severe shortage.
The Nigerian government said on Tuesday that the rebels were not powerful enough to launch an all-out offensive and the Italian oil company Eni said it would not be pulling out any of its workers.
Analysts remain concerned, however. Simon Wardell, of the World Markets Research Centre, said: ”Once again the security situation in Nigeria is proving to be a real concern.
”The conflict will not fade and the best that can be hoped for is the effective use of federal Nigerian soldiers.
”Oil companies have already sought to shift operations from onshore to offshore in an effort to reduce risks, but there remains a real possibility of significant shut-ins if the [rebel group] lives up to its threats.”
Oil markets have been jumpy about production from the Middle East, particularly Iraq and Saudi Arabia, and from Russia, where the oil company Yukos is locked in a fight with the government over unpaid taxes.
Wardell thinks that, while prices may not stay above $50 a barrel for long, winter demand for heating oil means they are unlikely to drop for several months.
The CBI said oil prices were a growing threat to firms’ prof its. Digby Jones, the director general, said: ”We don’t expect a dramatic reaction to this latest rise but it will eat into company profits and world growth will be restrained. It makes it all the more important that government does nothing to add to business costs.”
In China, other commodity prices jumped this year on buoyant global demand. Gold, showing the effect of the rise in oil prices, hit a five-week high of $411,35 an ounce on Tuesday while platinum reached a six-week high of $874. – Guardian Unlimited Â