Oil prices dip below $69 a barrel after overnight climb

Oil prices edged lower on 19 June after U.S. crude futures closed at a nine-month high above $69 (Rs2,813) a barrel in the previous session, but unrest in Nigeria continued to pressure the market.

Light, sweet crude for July delivery lost 12 cents to $68.97 a barrel in electronic trading on the New York Mercantile Exchange, midday in Europe.

The contract had risen $1.09 on 18 June to $69.09 a barrel after Nigerian oil unions called a strike for this week amid continuing unrest and violence in the country’s oil producing regions.
A Nymex front-month contract last closed above $69 on 1September.
Brent crude fell 10 cents to $72.08 a barrel on the ICE Futures exchange in London. Analysts said the news out of Nigeria on 18 June prompted large funds to buy energy futures, driving prices higher.

“I think it’s just profit taking,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo, speaking of Tuesday’s drop. The overnight jump in oil prices is not reflective of the demand-supply picture, he said.

“It’s quite difficult to understand why oil prices rise so high when crude oil supplies are still enough,” Emori said. Others, however, said any disruption, no matter how small, could boost prices.

“In a bullish market, every thimble full of oil counts,” said Peter Beutel, president of U.S. energy risk management firm Cameron Hanover. “Every little bullish feature will loom large.”
Attacks by villagers and gunmen that cut supply on two Nigerian oil facilities helped drive the price increase on 18 June.

Hundreds of angry villagers chased workers away from a Chevron Corp. oil-transfer facility on 18 June in southern Nigeria and occupied the premises to try to get money they say is owed by the oil industry.

Gunmen also seized some two dozen Nigerian workers and security forces at a flow station operated by Italian energy giant Eni SpA’s subsidiary Agip.
Nigerian oil unions called a general nationwide strike to begin on 20 June in protest of a government price hike on automobile fuel, but there are signs the strike could be called off as union leaders are studying a government counteroffer.

The government offered to halve its increase on automobile fuel and repeal a hike on the value-added tax, both of which have already gone into effect.
Emori said the market had already taken into account the supply risks posed by the general unrest in Nigeria, Africa’s biggest oil producer and one of the top overseas suppliers to the United States.

“We have to understand that the world’s oil production capacity is at a historic high,” Emori said. “That means that (producers) can quickly produce crude if there is a big drop” in global supply, he said.