Oil: Prices rise after Nigerian pipeline attack

LONDON - Oil prices rose on Tuesday after gunmen blew up an oil pipeline in Nigeria, killing eight people and cutting output from the major US supplier.

US January light crude rose 71 cents to US$58.05 a barrel in late afternoon activity, rebounding from a loss of more than US$4 since Wednesday. London Brent gained 22 cents to US$56.33 a barrel.

Sabotage by unidentified gunmen on a Nigerian pipeline operated by Royal Dutch Shell caused a large oil spill and fire in the Opec nation's remote Niger Delta, the company said.

Shell said it closed two oil fields and shut in 170,000 barrels per day of production to help curb the blaze.

Oil prices were also supported by expectations that weekly US government crude inventory data to be released on Wednesday would show a drawdown in stocks for last week.

US crude stocks were forecast to have fallen 1 million barrels due to lower imports and higher refinery runs, according to a Reuters poll of nine analysts, the first drop in three weeks.

Crude stockpiles in the world's biggest oil consumer still appear quite comfortable at around 13 per cent above last year's levels, experts said.

Analysts expect a 400,000-barrel fall in distillate fuels, including heating oil, but forecasts for warmer-than-usual weather for the first quarter next year have been easing worries over heating fuel stocks and weighing on prices.

US heating oil demand is expected to be near normal this week as a cold spell eases, while total demand for all heating fuels is forecast to be less than 3 per cent below normal, the National Weather Service said on Monday.

It has predicted much of the country will experience warmer than normal temperatures from January to March.

"The past couple of days have been based on one entity's view of what January's weather will look like and that hasn't been enough to establish a price trend," said Craig Pennington, global energy portfolio manager at Schroders.

Private weather forecaster WSI Corp. in its seasonal outlook also expects that January and March will be warmer than usual but predicts a colder than normal February will balance the anticipated lower demand for the other two months.

US prices rose to a one-month peak of US$61.90 last week, following a bout of colder weather in the US Northeast, but have lost over 6 per cent in the past four trading days.

- REUTERS

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_a1 at 28 Aug 2014 12:38:57 Processing Time: 461ms