Oil Settles at 6-Month High on Nigeria, US Refinery Fire

By: Reuters | 18 May 2009 | 04:10 PM ET

Oil prices rose nearly 5 percent to a six-month high Monday as violence in Africa's top crude exporter Nigeria and a fire at a key U.S. East Coast refinery revived concern about supplies.

The gains came after Nigerian militants said they had blown up two oil and gas pipelines in the Niger Delta and would blockade waterways in the region in an effort to disrupt energy exports from the OPEC country.

"Crude has been bolstered by the unrest occurring in Nigeria, where militants have declared an all-out war on the oil industry," Addison Armstrong, analyst at Tradition Energy in Stamford, Connecticut, said in a research note.

Unrest in the world's seventh largest oil exporter routinely impacts the country's shipments.

In the United States, an explosion rocked Sunoco's

"The Nigerian stories probably would not have much of an impact on their own, but combined with the refinery glitches are contributing to a positive start to the week," said Tony Machacek, a broker at Bache Commodities.

The refinery problem pushed U.S. gasoline futures to a seven-month high over $1.76 a gallon.

Machacek added that a weaker U.S. dollar and gains in equity markets were adding to oil's gains.

U.S. stocks rose Monday as a better-than-expected quarterly profit and upbeat outlook from Lowe's Cos Inc, the No. 2 U.S. home improvement retailer, fueled hopes the economic slump was easing and spending was stabilizing.

OPEC Meeting Looms

Oil has risen from a near five-year low of $32.40 reached in December as the market has tracked a rally in equities underpinned by hopes of an economic recovery.

Supply curbs by OPEC have also bolstered prices. The group, which has agreed to cut 4.2 million barrels per day of output since September, meets on May 28 to revisit policy.

So far, comments from ministers from the Organization of the Petroleum Exporting Countries suggest the group is unlikely to reduce supply further. But prices are still lower than some in the group would like.

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Iranian President Mahmoud Ahmadinejad said Monday that OPEC's second largest oil exporter considered an oil price of $80 to $90 barrel as "suitable," the semi-official Mehr news agency reported.

The June U.S. crude contract expires Tuesday and dealers said trading may be more volatile than usual as a result.

Copyright 2009 Reuters