Daily Telegraph: Oil prices slip back as supply fears ease: “…the price rocketed after saboteurs in Nigeria set fire to a major oil pipeline feeding the Bonny export terminal, which exports 500,000 barrels of oil a day. But Shell, which operates the pipeline, said it was diverting the flow to another pipeline, and that only 20,000 barrels of crude a day had been shut in.” (ShellNews.net)
By Malcolm Moore, Economics Correspondent (Filed: 13/10/2004)
The price of oil finally fell back yesterday, after trading as high as $51.50 a barrel in London, as the market decided that there would be enough oil for the winter.
"It is just a natural retracement from a very over-bought situation; a move back down should not be a big surprise," said Tony Machacek, a trader at Prudential Bache. After rising for six days in a row, the price of a barrel of Brent crude in London dropped 94 cents at the end of the day to $49.60 as traders took profits.
Earlier in the day, the price rocketed after saboteurs in Nigeria set fire to a major oil pipeline feeding the Bonny export terminal, which exports 500,000 barrels of oil a day.
But Shell, which operates the pipeline, said it was diverting the flow to another pipeline, and that only 20,000 barrels of crude a day had been shut in. Nigerian officials said that daily exports of around 2.5m barrels had so far not been troubled by striking workers. Nigerian unions began a four-day strike on Monday in protest at rising fuel prices, which have been lifted 25pc by President Olusegun Obasanjo. It is the third fuel protest in 18 months.
The International Energy Agency in Paris warned that steep oil prices are beginning to dampen the world economy. This year, demand for oil will rise 3.4pc to 82.4m barrels a day. But the IEA cut its forecast for demand growth in 2005 by nearly a fifth. "The cut reflects expectations of slower economic growth," the agency said in its monthly report, adding that countries such as China would turn to alternative fuels such as gas.
However, the IEA also said the price of light sweet crude, valued for its low sulphur content, was set to keep rising. "As a consequence of surging demand and the structural imbalance between supply and refining logistics, light sweet crude oil prices are, and will continue to be, supported by a tight product-driven market," the agency said. Light sweet crude is cheaper and easier to refine into petrol and heating oil.
The organisation added that demand for oil products remained strong, especially for diesel in North America and jet fuel and kerosene in Asia while "the market will be heading into the winter with lower than normal heating oil stocks". European supplies of heating fuels are down 3.4pc from last year as the winter approaches.
The agency also revised its estimates for global demand for Opec oil to 28.9m barrels a day in the fourth quarter.
Barclays Capital said that the high price of oil was being underpinned by significant damage to 12 large diameter oil and gas pipelines in the Gulf of Mexico from Hurricane Ivan.
"The pipelines will take a significant effort to locate and repair because they are buried by as much as 20 to 30ft of mud," said Kevin Norrish.
More than 17m barrels, mainly of light sweet crude, have now been lost. The US Minerals Management Service said last week that it would be about six months before production in the region is almost back to normal.
Since January, prices have risen by roughly $20 a barrel, but are still nowhere near the levels after the Iranian revolution in 1979. The price of oil then, adjusted for inflation, was about $80 a barrel.