Oil Rises to Eight-Month High on Weaker Dollar, Nigeria Attacks

By Ann Koh

June 30 (Bloomberg) -- Crude oil rose to the highest in eight months, set for its biggest quarterly gain since 1990, as the U.S. dollar declined and militant attacks in Nigeria raised concern that supplies may be disrupted.

Oil jumped as much as 2.6 percent in New York, adding to yesterday’s 3.4 percent gain, as investors sought commodities as a hedge against inflation. The dollar fell as much as 0.3 percent against major currencies. Royal Dutch Shell Plc shut a field after an attack by Nigerian rebels, disrupting supply from Africa’s largest producer.

“Now people are starting to pay attention to supply-side developments on the assumption that demand will rise from here onwards,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Oil prices are always going to be linked to fundamentals, but in recent times, there is still a high correlation with movements in currency.”

Crude oil for August delivery gained as much as $1.89, or 2.6 percent, to $73.38 a barrel on the New York Mercantile Exchange, the highest since Oct. 21. It was at $72.90 a barrel at 1:57 p.m. in Singapore.

Oil has risen 64 percent since the beginning of this year. It rebounded from $32.70 a barrel on Jan. 20 on optimism that the global economic recession is easing.

China, the world’s second-biggest energy consumer, raised domestic fuel prices today by as much as 11 percent to encourage refiners to produce more fuels amid higher crude costs.

Gold Advances

Gold for immediate delivery gained 0.4 percent to $941.42 an ounce at 9:40 a.m. in Singapore, gaining for a third quarter. Copper headed for its best six months in 22 years. The metal for delivery in three months on the London Metal Exchange climbed as much as 1 percent to $5,150 a metric ton.

A U.S. government report released tomorrow may show crude oil inventories falling for the seventh time in eight weeks, as refineries ramp up operation rates in anticipation of higher fuel demand during the Independence Day holiday, the second- busiest period for travel in the U.S. apart from Christmas.

Supplies probably fell 1.6 million barrels in the week ended June 26, according to the median of nine estimates by analysts surveyed by Bloomberg News. The Energy Department is scheduled to release its weekly report at 10:30 a.m. in Washington.

Still, the World Bank said June 22 that the recession was deeper than it expected three months ago. The International Energy Agency’s Medium-Term Oil Market Report yesterday cut oil- consumption estimates for every year through 2013 by about 3 million barrels a day. Consumption will average 86.76 million barrels a day in 2012, the first year demand will rise above 2008’s level of 85.76 million, the IEA said.

Shell’s Field

Brent crude oil for August settlement rose as much as $2.51, or 3.5 percent, to $73.50 a barrel on London’s ICE Futures Europe exchange. Yesterday, it gained $2.07, or 3 percent, to $70.99 a barrel, the biggest gain since June 4.

“The rise in crude is suggesting we’re not in a recession,” said Jonathan Barratt, a managing director at Commodity Broking Services Pty in Sydney. “We’ve got these geopolitical twinges that are helping it along.”

Indian refiners bought more crude in May after returning from maintenance shutdowns. The Indian Oil Ministry released provisional data showing that crude imports rose 19 percent to 12.02 million metric tons from 10.12 million tons a year earlier.

Shell, Europe’s biggest oil company, shut its Estuary oil field in Nigeria’s southern delta region after a militant attack.

The strike targeted two well clusters in the western Niger River delta, Tony Okonedo, a Shell spokesman, said by phone from Lagos yesterday.

The Movement for the Emancipation of the Niger Delta, the main rebel group in Nigeria’s oil region, said it attacked the oil field near Shell’s Forcados oil export terminal and set it ablaze.

To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net