Oil prices climb on Nigerian election fear
Concerns that oil supply could be disrupted as violence escalates
Updated: 5:17 p.m. CT April 23, 2007
NEW YORK - Crude oil prices soared above $65 a barrel in New York on growing concerns that oil supplies could be disrupted as violence escalates in Nigeria and oil workers in Belgium threatened to strike.
On Monday, following government elections over the weekend in Nigeria, gunmen battled security forces in Nigeria’s southern oil region, leaving at least seven people dead in the area’s main city, police said. The violence confirmed the fears of both Nigerians and oil traders: that political unrest in the country , a main oil supplier to the United States , is leading to more violence.
Sporadic gunfire was heard overnight, but intensified Monday afternoon after officials said the governing party candidate won presidential elections, and a top opposition politician rejected the vote, alleging fraud. Observers of the U.S.-based International Republican Institute identified several voting-day irregularities.
The week leading up to the elections in Nigeria was chaotic and bloody. At least 49 people have died in election-related violence since April 14. Stepped-up violence since early 2006 in the unruly southern region where crude is pumped has cut Nigeria’s daily production by about one quarter and sent global crude prices higher. More than 150 foreigners have been kidnapped over the past year.
"Amidst this turmoil, we doubt that Shell will decide to announce a resumption of Nigerian oil exports anytime soon (contrary to last week’s government claims otherwise)," wrote Man analyst Edward Meir in a Monday research note.
Light, sweet crude for June delivery climbed $1.78 to settle at $65.89 a barrel on the New York Mercantile Exchange. The contract rose just shy of $66 earlier in the session, trading as high as $65.96. Crude last topped $66 a barrel on March 29.
June gasoline futures gained about 5 cents to settle at $2.16 a gallon, well above their 2005 peak of $2.505 a gallon May 11.
In Nigeria, turnout appeared low for Saturday’s presidential vote, which was marked by ballot-paper shortages in opposition strongholds, intimidation by thugs and open rigging that favored the ruling party of outgoing President Olusegun Obasanjo.
The International Republican Institute said Sunday that its preliminary findings showed the election processes fall below the standard set by previous Nigerian elections and international standards witnessed by IRI around the globe.
The presidential winner must gain the most votes nationwide and at least a quarter of ballots cast in 24 of Nigeria’s 36 states. If not, a runoff election would be held within one month.
Meanwhile, in Belgium, workers at four refineries that produce 800,000 to 1 million barrels of oil a day are threatening to strike as early as May 9 after wage talks broke down last week.
"This is really important to the U.S., because Europe is our ... backup supplier," said Andrew Lebow, senior vice president at Man Financial. "We’re talking about fairly significant refinery capacity."
Prices were also supported by strong demand from China, the world’s second-largest oil consumer, which reported Monday that March crude oil imports rose 8.8 percent on year. Analysts expect demand to remain strong if Beijing is unable to cool off the country’s sizzling economy, which grew 11.1 percent in the first quarter.
"Anything that’s going to come along and change the supply figures, the market’s going to react," said Kevin Lindemer, executive managing director at Man Financial.
