There is a healthy inventory of crude stocks, and little reason other than fears of new disruptions to support continued high prices, analysts told Dow Jones. Brent crude was up $0.07 overnight in Europe, while in New York futures prices were $0.12 lower at $59.84 for April crude.
For investors wondering how to play oil right now, it appears the best course may be to watch CNN for Iranian and Nigerian news items and act accordingly.
In Frankfurt, following the lead of Friday's $0.06 gain on the Over The Counter Bulletin Board, ERHC Energy (OTC BB symbol: ERHE) closed up $0.05 Euros to $0.69.
Many investors expect a signing ceremony scheduled for tomorrow afternoon in Abuja, Nigeria to finally conclude protracted negotiations for five blocks of the Nigeria-Sao Tome and Principe Joint Development Zone.
Equity in all five blocks, including operatorship in two, was awarded to ERHC Energy and various work partners last May 31, but contracts have repeatedly been rejected or delayed by officials from Sao Tome and Principe, the tiny two-island nation in the Gulf of Guinea that will split bonus fees and oil royalties on a 60-40 basis under a treaty establishing the JDZ ratified in February 2002.
Meanwhile, Ijaw militants in the Niger Delta, the southern, oil-rich region of Nigeria where abject poverty co-exists with enormous oil riches that tend to head north, have threatened a "festival of carnage" against ExxonMobil workers and facilities if the company fails to pay reparations for an alleged oil spill that occurred in 1998.
Hree is the latest on these developments from Dow Jones:
By Tim Falconer
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Crude oil futures in London were steady Monday with
nagging concerns about supply outages preventing any major downside move.
"The only thing that is keeping the price of oil high is the threat of a loss of production from two sources (Iran and Nigeria) as the world doesn't currently have enough spare capacity to cover any major supply problem from each supplier," said analysts at Sucden Commodity brokers in London.
At 1115 GMT, the front-month April Brent contract on London's ICE Futures exchange was up 7 cents at $60.90 a barrel.
The front month April crude contract on the New York Mercantile Exchange was trading 12 cents lower at $59.84/bbl.
In terms of products, the ICE's gasoil contract for April delivery was down $2.25 at $529.50 a metric ton, while Nymex gasoline for April delivery was down 0.56 cent at $1.6810 a gallon.
Crude oil remains perched at lofty levels despite a growing case for lower prices.
Brokers pointed out that petroleum inventories in the U.S. are more than ample with data last week from the U.S. Department of Energy showing total crude and product stocks at a five-year high.
Despite some heavy fundamentals it's geopolitical concerns that continue to drive the market in the near term.
The prospect of more violence in the oil-rich Delta region of Nigeria and Iran's ongoing dispute with the West over its nuclear ambition is providing a crutch for prices.
"Robust oil demand growth around the world and the upside pressure associated with major unexpected output cuts, as evidenced by the recent 455,000 b/d crude oil supply disruption in Nigeria, continue to suggest that crude oil prices will remain high throughout the year," said Francisco Blanch, oil strategist at Merrill Lynch in London.
While no fresh violence in Nigeria was reported Monday, militants said their 21-day deadline for Exxon Mobil to pay compensation for a 1998 oil spill stands, and won't be subject to negotiations.
"If Exxon Mobil refuses to honor its obligation to the victims of the 1998 oil spillage, we shall unleash a festival of carnage on all their operations in the Niger Delta. This is our final word," the militant group said in an e-mail.
Meanwhile Iran's nuclear dispute continues to simmer away.
Iran said Sunday that it had rejected a Russian proposal for a compromise on Iran's intention to enrich uranium. It also made a vague threat that it might drop out of the Nuclear Nonproliferation Treaty over the decision by the U.N. nuclear monitoring body to forward its case to the Security Council.
"The Iran story still has some way to run, while Nigeria is still at the back of everyone's mind," said an oil broker based in London.
-By Tim Falconer, Dow Jones Newswires; +44 (0) 207-842- 9449;
tim.falconer@dowjones.com
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