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Home / Business / Companies / Energy

<EM>Oil:</EM> Prices set new record at US$58.60

By Bernie Woodall
17 Jun, 2005 09:53 PM4 mins to read

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NEW YORK - Oil prices set a new record of US$58.60 a barrel on Friday, after the United States and other Western nations shut consulates in oil-producing Nigeria following a terrorist threat.

Concerns about the ability of US refiners to cope with strong US demand, despite rising fuel costs, also
helped propel prices above the record of US$58.28 set in April.

US crude hit the record near the end of Friday's trading session on the New York Mercantile Exchange.

In London, Brent crude also hit an all-time high of US$57.95 a barrel on the International Petroleum Exchange, breaking the former record of US$57.65 set in April.

US crude settled at US$58.47 a barrel, up US$1.89. Brent settled at US$57.76 a barrel, up US$1.54.

The new records are for nearest-month futures, which are July delivery for US crude and August delivery for Brent. US December crude futures hit a record of US$60.40 a barrel, the all-time high for any monthly contract.

Worries about security of supply were highlighted by the closure in Nigeria of the US, German and British consulates in Lagos, after a warning of a terrorist threat.

Nigeria is the world's eighth-largest crude exporter and the fifth-biggest exporter oil to the United States. Its exports to the United States have risen to 1.1 million barrels per day in the most recent government statistics -- about 10 per cent of US crude imports.

While there was concern about Nigeria as an oil source, the country continued to produce and export crude on Friday.

US authorities shut their consulate after a threat involving foreign Islamic militants, US military and diplomatic sources said.

Intelligence information from foreign Islamic militant channels indicated a specific threat to the US presence in Nigeria and its Lagos consulate, a diplomatic source said.

Nigeria has been named by Islamic militant leader Osama bin Laden as a candidate for "liberation" and the United States said last month it had uncovered links between his al Qaeda network and Nigerians.

In a survey of industry executives this week in Boston, more than half considered "political upheaval in a strategic country" as the most likely cause of a disruption in oil supply.

Demand strength also supported prices.

US data this week showed brisk consumption of transport fuels, renewing concerns about refiners' ability to meet peak summer petrol demand and to build heating OIL and diesel FUEL inventories for later in the year.

"There's still high demand, despite the fact that oil's been quite expensive," said Sam Tilley, head of research at brokerage Sucden UK Ltd. "If there is bigger demand than currently, especially later in the year, will the refineries be able to handle it?" Demand for petrol over the past four weeks is up 3 per cent from a year ago, while consumption of distillates -- diesel, heating oil and jet fuel -- has risen by 6.5 per cent, US government data showed this week.

The strength of demand in the face of high prices has surprised some analysts, but a recent study showed that US retail fuel prices have not risen as much in the past 20 years as many other consumer goods have.

While petrol is up 67 per cent since 1984, all consumer goods are up 92 per cent, according to the study by consultancy John S. Herold.

"Even for unleaded regular selling for well over US$2 a gallon, petrol expenditures represent less than 15 per cent of the average yearly cost of operating a full-size passenger car," the study said.

US crude inventories are 9 per cent up year-on-year. But dealers are worried that spare world production capacity is limited now to heavy-sulfur crude from Saudi Arabia, which needs the type of advanced refinery technology that is already fully employed.

The Organisation of Petroleum Exporting Countries this week agreed to raise its production limits by 500,000 barrels per day from July, and put another 500,000 bpd on the market soon if prices remained high.

But Saudi Arabia, the only Opec member with significant production capacity to spare, said it is already meeting demand for as much as it can sell.

- REUTERS

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