Daily Independent (Lagos)
Adeola Yusuf
10 July 2009
Lagos — Global oil market was on Thursday gripped with apprehension as crude sunk further below $61 a barrel suggesting that the attack on oil installations in Nigeria do no longer have effects oil price direction.
Nigeria, Africa's biggest oil exporter has been suffering sabotage on its oil facilities, which has dipped the country's exports. Oil prices, it would be recalled, usually respond to the attacks by going higher.
"The new indication suggests that it is either Nigeria's output has become too infinitesimal to dictate price direction or that the attacks have become too much to have effects," analyst Clarence Chu said.
Traders were forced to look for direction after a dwindling demand sent the value of crude down 17 percent since last week.
After recovering by more than a dollar in earlier trading, benchmark crude for August delivery was up 46 cents to $60.60 a barrel by afternoon electronic trading in Europe on the New York Mercantile Exchange. On Wednesday, the contract fell more than 4 percent, or $2.79, to settle at $60.14.
Prices have dropped from an eight-month intraday high of $73.38 a barrel on June 30 on evidence that U.S. drivers, who typically hit the road more during the Independence Day holiday last week, are staying home in droves this summer.
The Department of Energy reported Wednesday that gasoline in storage grew by another 1.9 million barrels last week, the fifth straight week that stocks have grown.
"That's not a good sign," Chu, a trader at market maker Hudson Capital Energy in Singapore said. "It shows demand for gasoline hasn't picked up like it normally does this time of year."
Gasoline for August delivery gained nonetheless, rising by nearly 2 cents to $1.65 a gallon on the Nymex as it followed oil's surge earlier in the day.
Other signals recently that the global economy and crude demand aren't recovering strongly from a severe slowdown have also helped undermine investor confidence. On Wednesday, the Organization of Petroleum Exporting Countries predicted that demand for crude has fallen so sharply, it will take another four years to recover to 2008 levels.
Last week, the U.S. and Europe reported the highest unemployment rates in decades.
"It appears that at least for the short term the sentiment in oil markets has turned bearish and weak fundamentals are in the spotlight," said Vienna's JBC Energy in its daily report - a view shared by Chu, of Hudson Capital Energy.
"There's been a string of bad news," Chu said. "The fundamentals didn't support the price at $70 in the first place."
"The momentum will likely take us into the $50s."
In other Nymex trading, heating oil was flat at $1.54 a gallon. Natural gas for August delivery rose by more than 5 cents to $3.41 per 1,000 cubic feet.
In London, Brent prices rose 66 cents to $61.09 a barrel on the ICE Futures exchange.
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