London: Oil rose above $71 a barrel on Friday after Nigerian rebels said they blew up a wellhead in a Royal Dutch Shell oilfield and as equity markets rallied on optimism the global recession was easing.
The move in oil followed a 2% gain on Thursday and put it on course for a 7% gain this week, buoyed by prospects for an economic recovery that has lifted prices from below $40 over the past four months.
The release of the June consumer sentiment index by the Reuters/University of Michigan Surveys of Consumers later on Friday was expected to reflect a mildly improving outlook for the US economy, auguring well for ailing world energy demand.
Although US jobless claims last week rose, first-quarter gross domestic product shrank slightly less than estimated, suggesting the downturn may be easing.
By 2:09pm, the benchmark August US crude oil contract was up 88 cents per barrel at $71.11, having hit a high of $71.23, up $1. London Brent rose 85 cents to $70.63.
Nigeria’s Movement for the Emancipation of the Niger Delta (MEND) said it attacked the wellhead in the Afremo oilfield because the military had gone on a “punitive expedition” in Delta state shortly after President Umaru Yar’Adua announced an amnesty offer for rebels.
Shut in production
The military denied carrying out any such campaign. Independent confirmation of the details of the attack was not immediately available. Shell has said it is checking its operations for damage from Sunday’s attacks.
Afremo was one of the sites MEND also said it had attacked in a triple raid on Sunday. It described the field as being 14 miles from an export terminal through which crude oil from Shell’s Forcados fields is pumped.
Pipeline bombings, attacks on oil and gas installations and the kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two thirds of its installed oil output capacity of 3 million barrels per day.
The intensity of recent attacks in Nigeria have taken the oil market by surprise and tightened West African oil supplies.
“Attacks by the MEND have forced foreign oil companies to shut at least 133,000 barrels per day of Nigerian production in the last month,” said MF Global in its daily note to clients.
Iranian tension has also supported oil. About 20 people have died in protests after Iran’s 12 June presidential election, the worst unrest since the 1979 Islamic revolution.
Fuelling oil’s rise, Exxon Mobil said its huge Baytown refinery suffered an operational glitch that triggered flaring, sparking worries the largest US oil refinery could tighten gasoline stockpiles during this summer’s peak demand driving season.
Firmer Asian stocks on the back of Wall Street’s rally also lent support, with shares outside Japan climbing 1.4% and Japan’s Nikkei up 0.8%.
European shares advanced in early trade.
A further boost came from a fall in the dollar against most major currencies on Friday as investors shifted funds back into risky assets after the Federal Reserve this week appeared to confirm it would keep interest rates low for a while.
The Reuters/University of Michigan final June consumer sentiment index, due at 7:25pm, is expected to show a reading of 69.0 compared with 68.7 in the May report, a Reuters poll of economists showed.