London Brent crude was 63 cents up at $ 135.49. A ceasefire by rebels halting attacks on facilities in the Niger delta barely tempered the rise after two new attacks over the past week knocked out another tranche of Nigerian output. Some 340,000 bpd of Nigerian output was halted by fresh militant attacks last week, and more threats to production emerged on Monday as Nigera’s senior oil workers union began a limited strike at Chevron. The strike has yet to affect production.
Bellicose rhetoric between Israel and Iran and escalated militancy in Nigeria reduced what little optimism there was surrounding the Saudi’s meeting in Jeddah over the weekend," said John Kilduff, senior vice president at MF Global. Oil prices hit a record near $ 140 a barrel last week and have doubled from a year ago, stoking inflation and triggering protests worldwide. A meeting of top energy policy makers in Jeddah at the weekend offered little hope for a quick-fix.
Top exporter Saudi Arabia confirmed it will lift production for a second time to 9.7 million barrels per day (bpd) in July, its highest in more than 30 years, and pledged on Sunday to pump even more if the market demanded it. It detailed plans to boost capacity to 15 million bpd when future demand warrants the investment, in a bid to soothe growing fears that the world is running out of oil, but those measures failed to allay fears in an anxious market. "With the immediate benefit of higher Saudi production seemingly already lost, and with limited visibility on capacity expansion plans, there seems to be little here to cool prices," Citi analysts said in a note.
Analysts said the short-term supply situation was still very tight, putting tensions between Iran and Israel back in focus. Iran said it would give a "devastating" response to any attack on the country, the latest in a war of words centered on Tehran’s nuclear program. The New York Times quoted US officials last week as saying Israel had carried out a large military exercise, in an apparent rehearsal for a potential bombing of Iran’s nuclear facilities. Energy experts are concerned any conflict in Iran could lead to a shutdown of the Strait of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula through which roughly 40 percent of the world’s traded oil is shipped.
Sunday’s emergency meeting in Jeddah infused new urgency to the ongoing dialogue of major producers and consumers, participants said, but acknowledged a lack of hard measures for taming oil’s rally could leave the market underwhelmed. "The meeting was a bit disappointing," said a European diplomat. "The only producer that came up with any concrete proposals was Saudi Arabia-all the other producers just made bland statements about future capacity plans." OPEC President Chakib Khelil said yesterday oil producers could not pump more without demand for extra supply, and at the moment that demand did not exist.
