Oil's rally wavered on Thursday, but worries over the security of Nigerian supply supported prices despite an easier U.S. crude inventory picture and news that Russia's YUKOS would resume full supply to China. U.S. light crude slipped 28 cents to $49.23 a barrel, a little over $1 below Tuesday's all-time record of $50.47. London's Brent crude dipped 34 cents to $45.74. A Nigerian rebel group's threat to launch all-out war against the government in the oil-rich delta region has kept prices boiling this week. Mujahid Dokubo-Asari's Niger Delta People's Volunteer Force had agreed a truce after talks in capital Abuja on Wednesday, helping markets unravel some of its gains. However, analysts said fears still remained over the security of Nigeria's more than two million barrels per day. Peace talks continued in Abuja on Thursday.
"The Nigerian ceasefire inspired a classic knee-jerk sell off after the European close last night, but it did not take too long for the still less than conciliatory tone of the rebel leaders to show through," said 4Cast analyst Paul Bednarczyk. "The Niger Delta People's Volunteer Force still advises oil workers to leave the area, and until and unless there is some more tangible progress on talks the crude price is likely to eat still further into the ground lost after the upside surprise on crude stocks from the U.S. agencies yesterday." Fears for a disruption to world supply capacity, tightly stretched to accomodate the fastest demand growth in a generation, have underpinned more than 51 percent gains on crude prices so far this year.
U.S. CRUDE INVENTORIES BUILD
Prices held up despite data from the U.S. government Energy Information Administration on Wednesday showing a surprise build on crude stocks that had been expected to fall as a result of hurricane disruption in the Gulf of Mexico. The weekly inventory snapshot showed stocks of distillate fuels, including key supplies of heating oil, fell 1.3 million barrels to nearly five million barrels below year-ago levels. "Commercial crude stocks built 3.4 million barrels only because Hurricane Ivan cut already-depressed Gulf Coast crude runs by an additional 722,000 barrels per day," said SG economist Deborah White. The U.S. government says nearly 29 percent of Gulf of Mexico daily output is still shut in after Hurricane Ivan. This bullish sentiment helped the market brush off news that YUKOS would resume full deliveries of oil to China by October 20 after a brief cut forced by a lack of cash for export fees. Average U.S. prices this year of $39 a barrel, when adjusted for inflation, are near those of the Arab oil embargo in 1973-1974. But they remain much lower than the record $80 annual average following the 1979 Iranian Revolution. Consumers have so far put a brave face on this year's price surge, saying only continued strength poses a serious risk to global economic growth. European buyers have been shielded in part from dollar-denominated oil's gains by the strength of the euro, which has gained about six percent against the greenback in the last 12 months. In Euro terms, oil prices have hardly advanced from their mid-2000 levels.///