Oil prices spiked to a record above US$117 a barrel yesterday in Asia following an attack on a key pipeline in Nigeria at the end of last week.
Comments over the weekend by an OPEC official that the group isn’t likely to increase production also supported prices.
OPEC secretary-general Abdullah el al-Badri said on Sunday that oil prices would likely go higher and that the group was ready to raise production if the price pressure was due to a shortage of supply — something he doubted.
“Oil prices, there is a common understanding that has nothing to do with supply and demand,” al-Badri said on the sidelines of an energy conference in Rome.
Light, sweet crude for delivery next month rose as high as US$117.05 a barrel in Asian electronic trading on the New York Mercantile Exchange early yesterday. At midday in Singapore, the contract was trading at US$116.73 a barrel, up US$0.04 from the end of last week.
On Friday, May crude surged US$1.83 to US$116.69 a barrel following the attack on the Royal Dutch Shell PLC pipeline by the Movement for the Emancipation of the Niger Delta — the main militant group in Nigeria’s restive south.
The group also promised further attacks on the petroleum industry in Africa’s largest producer of crude oil.
On Friday, Shell confirmed a pipeline leak that it said appeared to have been caused by explosives. It said it had isolated the line for repairs and that a small quantity of production had been shut.
Attacks since early 2006 on Nigerian oil infrastructure by the militant group have cut nearly one-quarter of the country’s normal petroleum output, boosting oil prices. Nigeria is a major supplier of oil to the US.
A host of other supply and demand concerns in the US and abroad, along with the dollar’s weakness, have served to support prices, even as record retail gasoline prices in the US appear to be dampening demand. Crude prices rose nearly 6 percent last week.
Analysts believe the weaker dollar is the primary reason oil has soared well past US$100 a barrel this year. A sinking dollar draws investors to hard commodities such as oil and gold as hedges against inflation. Also, a weak dollar makes the commodities less expensive for buyers operating in other currencies.
On Sunday al-Badri said that the group “will not hesitate” to increase production if it thought the higher prices were due to shortages. But he said more oil will not solve the high prices.
Also over the weekend, Iranian President Mahmoud Ahmadinejad was quoted on Saturday as saying crude oil prices at US$115 a barrel are too low, and that oil must “discover its real value.”
“The oil price of US$115 a barrel in today’s global markets is a deceiving figure. Oil is a strategic commodity that needs to discover its real value,” the Web site of Iran’s state-run television quoted Ahmadinejad as saying.
The Iranian president made the remarks during a visit to an oil and gas exhibition in Tehran late on Friday.
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