Oil Is Little Changed After Rising 4% on Concern About Supplies

By Nesa Subrahmaniyan
July 11 (Bloomberg) -- Crude oil was little changed in New York after rising 4 percent yesterday as Brazilian oil workers threatened a strike and on rising concern that supplies from the Middle East and Nigeria may be disrupted.
Brazil's Oil Workers Confederation is planning a five-day strike from July 14 against Petroleo Brasileiro SA on platforms in the offshore Campos Basin, the source of 80 percent of the country's supply, a union official said. Oil also rose after Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire this week.
``It's a supply-focused market and trading has become very volatile,'' said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``Right now, geopolitical events are critical supply-related drivers.''
Crude oil for August delivery rose 6 cents to $141.71 a barrel on the New York Mercantile Exchange at 10:59 a.m. in Singapore. Yesterday, it soared $5.60 to settle at $141.65 a barrel, the biggest one-day increase since June 6. Prices had risen to an intra-day high of $142.13 a barrel. Nymex crude oil touched a record $145.85 on July 3. Futures are up 96 percent from a year ago.
In the last hour of floor trading in New York yesterday, prices jumped more than $5 a barrel as investors bought contracts based on technical trends indicating a rally in futures. The increase accelerated after futures broke through the July 9 high of $138.28 at 2:09 p.m. after approaching it at least five times.
About 4,500 Petrobras employees in the Campos Basin will take part in the protest to get full pay for the day they return to the mainland after a 14-day shift at sea, Jose Maria Rangel, the confederation's coordinator for the basin, said in an interview yesterday.
Iranian Tests
Iran, the second-biggest producer in the Middle East, this week tested missiles capable of reaching Israel, increasing concern that a conflict may cut supply. The Movement for the Emancipation of the Niger Delta said attacks will resume on oil facilities.
Iran's military yesterday fired the missiles during a third day of war games, Agence France-Presse reported, citing the Web site of Iranian state-run television. Missiles were also launched on July 9.
Iran has ignored United Nations efforts to halt its uranium- enrichment program and says further sanctions won't affect its plans to develop nuclear energy. The U.S. has led international efforts to force Iran to give up enrichment because of concern the technology may be used to develop nuclear weapons.
The standoff has led to concern that Iran may come under attack from the U.S. or Israel, disrupting exports from OPEC's second-biggest producer.
OPEC Secretary-General Abdalla El-Badri said at a press conference in Vienna yesterday that ``if something were to happen, it is impossible to replace the production of Iran.''
Cease-fire
The Nigerian militant group MEND will call off its unilateral cease-fire beginning midnight on July 12, the group's spokesman, Jomo Gbomo, said yesterday. MEND attacks on pipelines and other installations have cut more than 20 percent of Nigeria's oil exports since 2006.
MEND says it is fighting for a greater share of oil wealth for the impoverished inhabitants of the Niger Delta and accuses successive Nigerian governments of decades of oppression.
The group declared a cease-fire after a June 19 attack on Royal Dutch Shell Plc's Bonga deep-water oilfield, located 120 kilometers (75 miles) offshore that cut 190,000 barrels a day of oil output.
``Anything supply-related is going to keep this market boiling over,'' said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. ``Brazil's domestic disruption only adds to a bigger supply problem with MEND back in the news.''
Demand Forecast
The International Energy Agency increased its 2008 demand forecast for the first time in six months yesterday because of rising consumption in developing countries.
The Paris-based agency increased its outlook by about 0.1 percent, or 80,000 barrels a day, to 86.85 million barrels a day in its monthly report, leaving demand growth at 1 percent for this year. The IEA forecasts the same pace of growth for 2009.
The Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world's oil, cut its forecast of demand for its own crude oil through 2030, as record prices and environmental considerations encourage consumers to conserve fuel and rely more on biofuels.
OPEC lowered demand forecasts by 4.4 percent to 32.3 million barrels a day in 2015, and by 12 percent to 43.6 million a day in 2030, the group's secretariat said yesterday in its World Oil Outlook report. This means OPEC may unnecessarily commit $300 billion to new fields over the next 12 years, it said.
``This is the danger that OPEC may not invest because they are probably worried about a crash in demand and prices,'' said Mitsubishi's Nunan. ``The market now focuses on the medium to long term and if they don't invest in new capacity, that's obviously bullish.''
Brent crude oil for August settlement fell 7 cents to $141.96 a barrel at 10:57 a.m. Singapore time on London's ICE Futures Europe exchange. Yesterday, the contract gained $5.45, or 4 percent, to $142.03 a barrel. Prices climbed to a record $146.69 on July 3.