Crude futures gain as Nigerian unions increase pressure on the new government

Crude oil futures strengthened today after the government of Nigeria failed to reach an agreement with unions to end a three-day-old general strike in the largest oil-producing country in Africa.

For the day and week ending Friday, 22 June, 2007 crude-oil futures for light sweet crude for August delivery closed at $69.14/barrel (higher by $0.49/barrel or 0.71%) on the New York Mercantile Exchange. Prices rose 0.9% this week and are down 2.4% from a year ago.

Brent crude oil for August settlement rose 98 cents (1.4%) to $71.20 a barrel on the London-based ICE Futures exchange.

As per latest reports, yesterday, oil unions withdrew workers from export terminals in a bid to halt shipments. Nigerian unions increased pressure on the new government in the third day of the strike, protesting increases in taxes and fuel prices. Nigeria, a member of OPEC produced about 2.3 million barrels per day of crude oil in 2006.

Natural gas in New York fell to a three-month low as adequate storage eased concern over potential supply shortfalls later this year and as analysts forecast lower prices. Gas for July delivery declined 21.8 cents (3%) to settle at $7.13 per million British thermal units. Natural gas had its biggest weekly decline, of almost 10% since the week ended 22Dec.

Against this backdrop, July reformulated gasoline rose 4.01 cents to close at $2.2868 a gallon, finishing higher than last week's close of $2.2601, while July heating oil tacked on 1.33 cents to end at $2.038 a gallon, up from the week-ago close of $2.0106.

Oil might touch $70 if Brazil also strikes

Concern that the dispute over Iran's nuclear program might disrupt shipments from the country has supported prices over the past year. Attacks on oil facilities in Nigeria have curtailed shipments and tight supplies from OPEC have also bolstered prices.

OPEC currently said that high prices alone aren't enough to warrant an increase in production because there's ample supply of crude oil for refiners. The group is due to meet in Vienna on 11 September to review its production ceiling for the winter season, when consumption of heating fuel increases in the Northern Hemisphere.

Last week, IEA revised higher its outlook for worldwide demand of oil products, citing new data it's received from Nigeria, Indonesia and other countries. Global demand is expected to increase by 2% to 86.1 million barrels a day from a revised 84.5 million barrels a day in 2006. That's 420,000 barrels more than the IEA projected in May. In May, it had predicted a 1.8% rise in 2007.

U.S. crude oil imports climbed 650,000 barrels per day last week to average 10.8 million barrels per day. Motor gasoline imports averaged almost 1.3 million barrels per day. The weekly report by Energy Department on natural gas supplies will be out tomorrow.

It has been reported that oil workers in Brazil are also preparing to strike around 5 July. If that comes around and strike at Nigeria continues, oil might just easily cross the $70 mark early next week.