Oil Rises as Nigeria Supply Disruptions Outweigh Saudi Pledge

By Christian Schmollinger

June 24 (Bloomberg) -- Crude oil rose for a third day in New York as disruptions in Nigeria have removed more supply from the market than Saudi Arabia's promised output increase.

Attacks on a Royal Dutch Shell Plc platform and a Chevron Corp. pipeline last week halted 300,000 barrels a day of Nigerian output. The country's white-collar oil union began a strike against Chevron today that may stop up to 350,000 barrels a day. Saudi Arabia will pump an extra 200,000 barrels a day next month, Oil Minister Ali al-Naimi said June 22.

``When you have so many short-termed focused traders in the market, something like what's happening in Nigeria has a big influence,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne.

Crude oil for August delivery climbed as much as 74 cents, or 0.5 percent, to $137.48 a barrel on the New York Mercantile Exchange. The contract was trading at $136.94 a barrel at 9:40 a.m. in Singapore.

Prices touched a record $139.89 on June 16 and are up 99 percent in the past year. Yesterday, oil rose $1.38, or 1 percent, to settle at $136.74 a barrel.

An attack on Shell's Bonga platform, off the coast of Nigeria, on June 19 may halt deliveries for as long as six weeks, the company said last week. The field produces about 190,000 barrels a day. Chevron halted 120,000 barrels a day of onshore production after its pipeline was blown up last week.

After the latest round of attacks, the Movement for the Emancipation of the Niger Delta said it will declare a cease- fire starting today to ``give peace and dialogue another chance.'' Action against foreign oil companies in Nigeria will end at midnight local time today, the group said.

Low-Sulfur Oil

Brent crude oil for August settlement was at $136.02 a barrel, up 11 cents, on London's ICE Futures Europe exchange at 9:26 a.m. Singapore time. It rose $1.05, or 0.8 percent, to settle at $135.91 a barrel yesterday. Prices climbed to a record $139.32 on June 16.

Nigeria produces low-sulfur, or sweet, oils prized by refiners because of the high proportion of gasoline and distillate fuels it yields. Distillate fuel is a category that includes heating oil and diesel.

``The employees belonging to the Petroleum and Natural Gas Senior Staff Association of Nigeria have declared a work stoppage,'' Chevron spokeswoman Margaret Cooper said yesterday in a statement.

Cooper said it's too early to comment on the impact of the strike on operations. Chevron in 2007 produced about 350,000 barrels of oil a day from its 32 fields in Nigeria, according to the company's Web site.

Full-Scale Strike

Jonathan Omare, secretary of the local Chevron union, said a full-scale strike had begun, though production was not yet affected. ``The strike is everywhere,'' Omare said by telephone. `Nobody's working apart from the guys in the field.''

Saudi Arabia first pledged to raise output by 200,000 barrels a day after King Abdullah met with United Nations Secretary-General Ban Ki-Moon on June 15.

``People were expecting an increase of about this size, so it's a minor element in the market today,'' Lynch said. ``There would have had to be an increase of 1 million barrels to have a major impact.''

The kingdom will offer more oil if there is demand and also plans to increase its production capacity to 12.5 million barrels a day by the end of next year, Al-Naimi said June 22 at a summit in Jeddah. Capacity may eventually rise to 15 million if necessary, using oil from five ``mega'' fields that could potentially start up within three years, Al-Naimi said.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.