Crude Oil Falls After Nigerian Militants Call End to Attacks

By Gavin Evans

Sept. 22 (Bloomberg) -- Crude oil fell for the first time in four days as Nigerian militants stopped attacks on oil facilities and investors awaited the U.S. government's proposed $700 billion rescue package for the finance industry.

The rally in oil, up 15 percent the past three days, stalled as the Movement for the Emancipation of the Niger Delta, known as MEND, ended attacks that cut production by 280,000 barrels a day the past week. U.S. lawmakers are pledging fast consideration of the Treasury's plan to buy devalued mortgage- related securities from investment firms to keep the financial system from stalling.

``Up until the weekend, MEND had been talking about an `oil war','' said David Moore, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``Anything that is able to provide some stability for the financial system and shore up the economic outlook is a supporting factor.''

Crude oil for October delivery fell as much as $1.20, or 1.2 percent, to $103.35 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $103.63 at 9:50 a.m. in Sydney. The contract, which expires at the close of trading today, jumped as much as 7.4 percent on Sept. 19 as investors bought oil to cancel out earlier bets on falling prices.

The more widely held November contract traded at $102.40 a barrel, down 0.3 percent. It gained 5.3 percent on Sept. 19, leaving it at a $1.80-a-barrel discount to October oil, the biggest margin between the two leading contracts for six months.

Hurricane, Sentiment

October's premium over the November contract also reflects the ``very tight'' physical market in the U.S. after Hurricane Ike cut production and shut some gulf refineries, Commonwealth's Moore said. Day-to-day shifts in investor sentiment have also been ``extreme,'' he said.

Oil fell more than $10 a barrel early last week as the bankruptcy of Lehman Brothers Holdings Inc. shocked world equity markets. Prices gained 3.3 percent over the five trading days, the first weekly increase since August, as the dollar slumped on the prospect of the biggest U.S. financial bailout since the Great Depression.

The U.S. dollar fell to $1.4495 against the euro in early Asian trading today. The currency dropped 1.7 percent last week, its biggest decline since March 28, to $1.4466 per euro in late New York trading on Sept. 19.

While the U.S. rescue package has put pressure on the dollar, it's too early to say how much more weakness may be to come, and how that will flow into commodity markets, Moore said.

A lot will depend on the timing of asset purchases and the prices paid, and on the level of underlying economic activity, he said.

``We're in the very early days of understanding the package,'' Moore said. Investors are continuing to ``fine-tune'' their perceptions of it and what it will mean for the U.S. economy, he said.

Brent crude oil for November settlement rose $4.42, or 4.6 percent, to $99.61 a barrel on London's ICE Futures Europe exchange on Sept. 19.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net