IPE Brent up on Nigeria oil disruption, Iraq fears

URL Reuters, 03.25.03, 7:24 AM ET

LONDON, March 25 (Reuters) - Brent oil futures extended gains on Tuesday as fierce resistance to U.S.-led forces in Iraq provoked fears of a protracted war, and open-ended supply disruptions in Nigeria further stressed the market.

At 1200 GMT, Brent crude for May delivery stood 61 cents higher at $26.70, building on gains of $1.75 on Monday.

U.S. light crude on the New York Mercantile Exchange (NYMEX) was up 81 cents at $29.47 per barrel in ACCESS trade, adding to gains of $1.75 in New York on Monday.

Traders said the twin concerns of Iraq and Nigeria were moving the market with worries that an extended Iraq campaign could disrupt oil supplies from the Middle East.

They also said the loss of sweet Nigerian crude due to ethnic unrest was a bullish factor at this time of the year when refiners are trying to up gasoline production ahead of summer. Nigerian sweet crude has a high gasoline yield.

"Iraq and Nigeria are the two classic symptoms driving the market. The strong performance today is off concerns about production loss in Nigeria and the Iraqis fighting back hard," said one IPE trader.

"Last week some people overdid it on the downside," he added. IPE Brent futures for May delivery fell under $25 a barrel for the first time in over three months on Friday.

U.S. marines fought fierce battles with Iraqi forces on Tuesday in the strategic southern city of Nassiriya and forward units began an assault on troops defending Baghdad. British Prime Minister Tony Blair warned of tough fighting ahead.

Earlier Iraq asked other oil producing states not to hike output to compensate for the loss of Iraqi crude.

Traders said that while world oil markets are generally well supplied, they are still spooked by the shutting of nearly 40 percent of OPEC member Nigeria's over two million barrels per day (bpd) oil output.

As unrest escalates, oil multinationals have closed down practically all their operations in Nigeria's troubled western delta with production of some 817,000 bpd shut in. They could not say when production would resume.

Analysts said the shut-ins once again raised the issue of spare production capacity within the OPEC cartel as another member state Venezuela is only just getting back to normal after a protracted three-month strike.

Weekly U.S. government petroleum data due on Wednesday should show a modest decline in U.S. gasoline stocks, analysts polled by Reuters predicted. April NYMEX unleaded gasoline was up 1.30 cents a gallon to 91.09 cents.

National crude stocks were seen rising by 2.6 million barrels, or about one percent, in the week to last Friday.

April IPE gas oil stood $8.50 higher to $234.75 a tonne.