Oil extends gains as traders watch Iraq and Nigeria

Reuters, 03.30.03, 11:28 PM ET By Tanya Pang

SINGAPORE, March 31 (Reuters) - Oil prices ticked higher on Monday as missiles pounded Baghdad for the 12th day and renewed violence at the weekend continued to keep about 40 percent of Nigeria's crude production off the market.

U.S. light crude climbed 30 cents to $30.46 a barrel, while London's Brent crude rose one cent to $26.36 a barrel.

Dealers said prices were expected to head higher in the near term as uncertainty remained on how long the U.S. campaign to oust Iraqi President Saddam Hussein would last and when Iraq would be able to resume exporting crude oil.

Also clouding the picture was a new bout of political violence at the weekend in the oil city of Port Harcourt in Nigeria's Niger Delta, where clashes between tribal factions has shut in more than 800,000 barrels of the country's daily output of a little over two million barrels per day.

"We are expecting a range of $33 to $36 for U.S. crude for this week and next week. War is looking like it will take one to two months, maybe even longer, and there's the Nigerian problem," said Tetsu Emori at Mitsui Bussan Futures in Tokyo.

"I don't see any bearish factors right now, we cannot be bearish in this market," he said.

Sydney-based oil analyst Simon Games-Thomas said U.S. crude was likely to test $34 a barrel.

"The market is trying to stabilise as the war unfolds. On balance, I remain tentatively bullish at this stage... I think that we should again test $34," Games-Thomas said in a note.

Oil has been rising since December when an anti-government strike disrupted supplies from the world's fifth-biggest exporter, Venezuela, and Washington stepped up a campaign to disarm Iraq of weapons of mass destruction, threatening to use force if necessary.

U.S. crude, which hit a 12-year peak at $39.99 in late February, has averaged $33.79 in the first three months this year, more than $12 or 56 percent higher than in the first quarter of 2002 and 29 percent above the 2002 average of $26.15.

A fresh wave of missiles hit Baghdad on Monday as U.S. and British forces intensified the air war on the Iraqi capital and mounted a sustained series of bombings on the city's outskirts where Republic Guard units are believed to be dug in.

Early expectations of a quick and easy war in Iraq, which denies that it possesses illegal weapons, have faded as U.S. and British forces have met firm Iraqi resistance leading to a rise in the casualty tally.

Washington last week ordered another 100,000 troops to move to the Gulf region.

NIGERIA UNION SHORTENS STRIKE

The OPEC producers' cartel has ramped up production to counter shortfalls in supplies from Venezuela earlier this year and more recently Iraq.

Baghdad's exports of about 1.7 million bpd ground to a halt in the run up to the U.S.-led war on March 20. It continues to send small volumes of oil via pipeline from its northern fields to the Turkey's Mediterranean port Ceyhan, but no tankers are loading the crude.

Nigeria's main trade union, Nigeria Labour Congress (NLC), said on Saturday it had modified a previous call for an indefinite strike beginning on Tuesday and would limit the walkout to three days.

Output in Africa's biggest producer has already been cut by almost 40 percent as foreign companies shut operations in the Niger Delta because of bloody clashes between rival tribes.

An indefinite strike by the NLC over pay would have likely reduced production further as many public sector workers from the blue-collar oil union NUPENG would be included in the action.

John Odah, NLC secretary-general, said the strike would run for three days, Tuesday until Thursday, and also be limited to public sector workers.

He said the strike might resume after presidential and local elections scheduled to be held from April 12 to May 13 if the government did not implement a promised 12.5 percent pay increase for civil servants.