Troubles cut production, add to prices

Continuing unrest in Nigeria and weather problems sent the price of crude oil substantially higher on Friday.  In Nigeria, militants kidnapped eight oil workers from an offshore platform.  Meanwhile, in a separate development in the African nation, Shell cut production by another 50,000 barrels per day due to a pipeline leak.  That brought Shell’s total lost output in Nigeria to 505,000 barrels of oil per day.  In Texas, bad weather on Friday interrupted production at refineries owned by Valero and Citgo Petroleum.

As a result, July contracts for Brent crude added $1.30 to $70.79 per barrel on the International Petroleum Exchange in London, while West Texas Intermediate crude was up $1.56 to $71.90 per barrel on the New York Mercantile Exchange.  The Texas production disruptions added to undiminished demand for gasoline in the US sent Nymex July unleaded gasoline prices up 4.3 cents to $2.170 per gallon.

Elsewhere, during the meeting of the Organisation of Petroleum Exporting Countries, the cartel rejected member nation Venezuela’s call to cut output and the expected decision to leave production at existing levels was taken.  The Saudi Arabian oil minister said, during the meetings, that market fundamentals do not support a price for crude oil of over $50 per barrel.  The implication in his remarks was that geopolitical issues were adding $20 per barrel to the price of oil, twice as much as the estimate of most analysts.