Crude Oil Rises on Concern About Brazilian, Nigerian Supplies

By Nesa Subrahmaniyan

July 11 (Bloomberg) -- Crude oil rose for a third day in New York, building on its largest one-day gain for more than a month yesterday, after Brazilian oil workers threatened a strike and on concern that Middle East and Nigerian supplies may be disrupted.

Oil gained 4.1 percent yesterday after Brazil's Oil Workers Confederation said it is planning a five-day strike from July 14 against Petroleo Brasileiro SA on platforms in the offshore Campos Basin, the source of 80 percent of the country's supply. Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire this week.

``It's a supply-focused market and trading has become very volatile,'' said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``Right now, geopolitical events are critical supply-related drivers.''

Crude oil for August delivery rose as much as $1.54, or 1.5 percent, to $143.19 a barrel on the New York Mercantile Exchange and was trading at $143.10 at 3:09 p.m. in Singapore. Yesterday, it soared $5.60 to settle at $141.65 a barrel, the biggest one- day increase since June 6. Prices had risen to an intra-day high of $142.13 a barrel. Nymex crude oil touched a record $145.85 on July 3. Futures are up 96 percent from a year ago.

In the last hour of floor trading in New York yesterday, prices jumped more than $5 a barrel as investors bought contracts based on technical trends indicating a rally in futures. The increase accelerated after futures broke through the July 9 high of $138.28 at 2:09 p.m. New York time yesterday after approaching it at least five times.

Oil may rise next week because of threats to supply from Iran and Nigeria and falling stockpiles in the U.S., the biggest energy-consuming country, according to a Bloomberg News survey.

Supply Threats

About 4,500 employees of state-controlled Petrobras in the Campos Basin will take part in the protest to get full pay for the day they return to the mainland after a 14-day shift at sea, Jose Maria Rangel, the Brazil Oil Workers Confederation coordinator for the basin, said yesterday.

Iran, the second-biggest producer in the Middle East, this week tested missiles capable of reaching Israel, increasing concern that a conflict may cut supply. Iran's military yesterday fired the missiles during a third day of war games, Agence France-Presse reported, citing the Web site of Iranian state-run television. Missiles were also launched on July 9.

Iran has ignored United Nations efforts to halt its uranium-enrichment program and says further sanctions won't affect its plans to develop nuclear energy. The U.S. has led international efforts to force Iran to give up enrichment because of concern the technology may be used to develop nuclear weapons.

Iran's Exports

The standoff has led to concern that Iran may come under attack from the U.S. or Israel, disrupting exports from OPEC's second-biggest producer.

OPEC Secretary-General Abdalla El-Badri said at a press conference in Vienna yesterday that ``if something were to happen, it is impossible to replace the production of Iran.''

The Movement for the Emancipation of the Niger Delta said attacks will resume on oil facilities. The Nigerian militant group will call off its unilateral cease-fire beginning midnight on July 12, the group's spokesman, Jomo Gbomo, said yesterday.

MEND's attacks on pipelines and other installations have cut more than 20 percent of Nigeria's oil exports since 2006. MEND says it is fighting for a greater share of oil wealth for the impoverished inhabitants of the Niger Delta.

The group declared a cease-fire after a June 19 attack on Royal Dutch Shell Plc's Bonga deep-water oilfield, located 120 kilometers (75 miles) offshore that cut 190,000 barrels a day of oil output.

Market Boiling

``Anything supply-related is going to keep this market boiling over,'' said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. ``Brazil's domestic disruption only adds to a bigger supply problem with MEND back in the news.''

The Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world's oil, cut its forecast of demand for its crude oil through 2030, as record prices and environmental considerations encourage consumers to conserve fuel and rely more on biofuels.

OPEC lowered demand forecasts by 4.4 percent to 32.3 million barrels a day in 2015, and by 12 percent to 43.6 million a day in 2030, the group's secretariat said yesterday in its World Oil Outlook report. This means OPEC may unnecessarily commit $300 billion to new fields over the next 12 years, it said.

``This is the danger that OPEC may not invest because they are probably worried about a crash in demand and prices,'' said Mitsubishi's Nunan. ``The market now focuses on the medium to long term and if they don't invest in new capacity, that's obviously bullish.''

Brent crude oil for August settlement rose as much as $1.53 a barrel, or 1.1 percent, to $143.56 a barrel and was trading at $143.23 at 3:10 p.m. Singapore time on London's ICE Futures Europe exchange. Yesterday, the contract gained $5.45, or 4 percent, to $142.03 a barrel. Prices climbed to a record $146.69 on July 3.

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.