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Oil Prices Up on Iran Nuclear Concerns

Posted on: Friday, 13 January 2006, 09:00 CST

By GILLIAN WONG

SINGAPORE - Crude futures fell Friday on reports that Royal Dutch Shell PLC had restarted production at a field in Nigeria, but the market continued to fret over the potential impact of Iran's nuclear ambitions.

Light, sweet crude for February delivery on the New York Mercantile Exchange dropped 69 cents to $63.25 a barrel in electronic trading by afternoon in Europe after rising earlier as high as $64.33.

February Brent crude futures on London's ICE Futures exchange fell 76 cents to $61.86 a barrel.

Dow Jones Newswires quoted a Shell spokesman Friday as saying production had restarted Thursday at an oilfield shut down after the kidnapping Wednesday of four foreigners from an offshore oil platform. The spokesman also said Shell expected a gradual return to full production early next week.

That came after the company had earlier sent a message to shippers declaring its inability to meet export commitments due to unforeseen circumstances. Shell had said oil loading would be delayed three to four days beginning Friday.

Nigeria is Africa's leading oil exporter and the fifth-biggest source of U.S. oil imports. The country produces about 2.5 million barrels a day. The kidnapping, along with a pipeline rupture, cut oil production in the West African country by 10 percent.

Also Friday, Iran - a major oil producer - vowed to end all voluntary cooperation with the U.N. nuclear watchdog if it is referred to the Security Council for possible sanctions over its controversial nuclear program.

Foreign ministers of Germany, Britain and France said Thursday that nuclear talks with Iran had reached a dead end after more than two years of acrimonious negotiations and the issue should be referred to the U.N. Security Council.

"The major concern is that there is not enough spare production capacity in the world to cover any loss of production from Iran should any action be taken against it," said Sucden Commodity brokers in London.

Traders also focused on unseasonably balmy weather in the U.S. Northeast, a key heating oil market. Prices have fallen after a U.S. government report showing weak demand last week for industrial and home-heating fuel.

Heating oil on the Nymex lost 1.5 cents to $1.6960 a gallon while gasoline lost about the same amount to $1.7030 a gallon.

Natural gas futures, which on Thursday settled below $9 per 1,000 cubic feet for the first time in nearly five months, extended their losses Friday as they fell 6 cents to $8.885 per 1,000 cubic feet.

"Natural gas pricing is an immediate telltale sign of the winter situation: it is fairly mild, and this is likely to impact heating oil and crude demand as well," said analyst Victor Shum of Purvin & Gertz in Singapore.

Natural gas hit an all-time peak of $15.78 on Dec. 13 on concerns of a potentially cold winter and disrupted production in the Gulf of Mexico in the wake of Hurricane Katrina.

While U.S. petroleum supply data this week showed a surge in inventories of gasoline and heating oil, predictions of some icy weather over the weekend in the northeastern United States - the world's biggest heating oil market - is likely to support prices, traders said.

Trading on the Nymex will be closed Monday for Martin Luther King Day.

Source: Associated Press/AP Online

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