Oil prices soared to a new record above $50 on Tuesday as uncertainties over Nigerian output heightened worries of a severe supply disruption ahead of winter. U.S. light crude jumped 83 cents to $50.47 a barrel, the highest level recorded in the 21-year history of crude futures on the New York Mercantile Exchange. Concerns that high energy prices would crimp growth and hit corporate earnings knocked Asian stocks lower, sent the Japanese 10-year bond yield to a six-month high and pushed the yen to a six-week low against the dollar . Rebels fighting for sovereignty in Nigeria have warned oil companies to shut production in the Niger delta before they declare an all-out-war on Oct. 1. The delta pumps all of Nigeria's 2.3 million barrels per day (bpd). Nigerian unions also served a 14-day ultimatum to the government on Monday to reverse a 15 percent fuel price hike or face an indefinite nationwide strike.
The threat to supplies from OPEC's fifth-biggest producer and the world's seventh-largest exporter, comes amid intermittent disruptions to oil flows from Iraq and Russia and as world producers pump almost at full tilt to feed the fastest demand growth in 24 years. "This is the perfect storm. These are the perfect ingredients for a real explosion in crude prices, there is no slack in the system. I can see this going to $52," said Tony Nunan at Mitsubishi Corp. in Tokyo.
PERFECT STORM
U.S. fuel inventories are already at low levels after a string of hurricanes in the oil-producing Gulf of Mexico delayed oil shipments to the world's biggest consumer and disrupted offshore production and refinery operations. Hurricane Ivan has cost a little over 11 million barrels of crude output since Sept. 13 and 492,000 bpd remained closed. The slow recovery in operations is expected to lead to further falls in U.S. fuel inventories at a time when they should be building ahead of winter. U.S. crude stocks are running at a 13-million-barrel deficit compared with a year ago. The Bush administration loaned refiners about 1.7 million barrels of oil from the nation's emergency stockpile last week following the hurricane delays, but has said it would not use the Strategic Petroleum Reserve (SPR) to ease prices. "The president's economic team is monitoring the situation closely," White House spokesman Trent Duffy said after U.S. crude broke above $50. "The SPR is only to be used for major supply disruptions and physical emergencies."
The OPEC producers' cartel, which controls more than half of global crude exports, is producing close to 30 million bpd, the highest level since the late 1970s. OPEC president Purnomo Yusgiantoro said the Organisation of the Petroleum Exporting Countries was powerless to stop oil's relentless rise despite 1.5 million bpd of spare capacity. "At the moment there's nothing we can do. OPEC has spare capacity, however, whatever we do there is no sensitivity in the market," Purnomo, also Indonesian oil minister, told . German Finance Minister Hans Eichel warned ahead of Friday's Group of Seven meeting in Washington that global growth would be at risk if oil prices remained at current levels. "There will certainly be an effect on growth if such a high oil price is sustained," Eichel said in an interview on Monday.
REBELS TARGET OIL FIRMS
Much of OPEC's additional crude is heavier and higher in sulphur content, which needs greater processing into premium oil products such as gasoline. But Nigeria's crudes are lighter and much easier for refiners to process. Royal Dutch/Shell group , Nigeria's top oil producer, has evacuated 235 non-essential staff and has cut 30,000 to 40,000 bpd of output due to security curbs in the southern delta where militants are fighting government troops. The Niger delta People's Volunteer Force released a communique late on Monday accusing Shell and Italy's Agip, a unit of ENI , of collaboration and warning that anyone assisting the state would be considered an enemy. The rebels want to force political reforms or gain sovereignty for the impoverished Niger delta. Last year's uprising by members of the Ijaw tribe forced the temporary closure of 40 percent of the country's output.///