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Crude Futures Up as Market Digests Nigeria News
By LONDON, Dec 22, 2005 (Dow Jones Commodities News via Comtex) By Tim Falconer Of DOW JONES NEWSWIRES
Dec 23, 2005, 09:52

Crude futures rose Thursday as speculators worked through the implications of Royal Dutch Shell PLC's (RDSB.LN) Nigeria division declaring force majeure on 180,000 barrels-a-day of oil after a recent attack on its pipeline in the Niger Delta.

"Admittedly a lot of the Nigeria pipeline news is already priced into the market but we have noticed spreads tighten up," said an oil broker based in London.

At 1115 GMT, the front-month February Brent contract on London's ICE Futures exchange - formerly called the International Petroleum Exchange - was up 54 cents at $57.26 a barrel.

The front month January crude contract on the New York Mercantile Exchange was trading 42 cents higher at $58.98/bbl.

In terms of products, the ICE's gasoil contract for January delivery was up $10 at $522.75 a metric ton, while Nymex gasoline for January delivery was 1.36 cents higher at $1.5526 a gallon.

Crude's latest move higher comes after prices on both sides of the Atlantic rose Wednesday on inventory data from the U.S. Department of Energy showing a bigger than expected draw in distillate inventories.

Adding to the slightly bullish tone is concern that Royal Dutch Shell's pipeline problems in Nigeria might prove longer lasting than expected.

Shell said it's still unclear how long the force majeure on its light, sweet crude exports would last. Shell said the company and local officials were still working Wednesday to put out a fire caused by the pipeline blast, which killed eight people.

"The firefighting crew has been mobilized to put out the fire, but we don't know how long it will take," the spokeswoman added.

An attack on the pipeline Tuesday resulted in the shut-in of 180,000 b/d of crude oil and closed three flow stations feeding into the Bonny export terminal.

The Bonny export facility is used to export much of Nigeria's light, sweet crude, a good portion of which goes to the U.S.

In other news, the Organization of Petroleum Exporting Countries is likely to reduce its crude oil production after the high-demand Northern Hemisphere winter, the group's president said Thursday.

"I expect OPEC to decrease output for the second quarter," Sheikh Ahmad Fahad Al-Ahmad Al-Sabah said, adding that the group isn't expected to change its production policy for the first quarter.

His remarks, made during a one-day visit to Beijing to meet with top Chinese policy makers, are the latest hint from OPEC of its concerns that oil demand will fall after winter, bringing prices down.

In the near term, oil prices are likely to take direction from the release of weekly natural gas storage statistics from the U.S. DOE at 1530 GMT.

Natural gas analysts and traders expect the report to show a drop in inventories of 169 billion cubic feet for the week ending Dec. 16, according to the average forecast in a Dow Jones Newswires survey.


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