Oil Approaches 100USD per Barrel (again)

[Dark Silver]

Associated Press

NEW YORK (AP) -- Oil prices jumped sharply Wednesday, once again approaching $100 a barrel on supply concerns sparked by renewed violence in Nigeria and a warning that OPEC may not be able to meet its share of global oil demand by 2024.

Word that several Mexican oil export ports were closed due to rough weather added to the gains.

In Nigeria, bands of armed men invaded Port Harcourt, the center the oil industry Tuesday, attacking two police stations and raiding the lobby of a major hotel. Four policemen, three civilians and six attackers were killed. The Niger Delta Vigilante Movement claimed responsibility for the attack.

"Although the violence has not impacted oil flow out of the country, it has reignited supply concerns as militant attacks have reduced Nigeria's crude output by roughly 20 percent since 2006," said John Gerdes, an analyst at SunTrust Robinson Humphrey in a research note. Nigeria is Africa's largest oil producer.

Separately, the Organization of Petroleum Exporting Countries said its member nations may not be able to meet demand as early as 2024, though OPEC also said that deadline could slide for decades if members increase production more quickly.

Still, the warning gave investors pause, said Amanda Kurzendoerfer, an analyst at Summit Energy Services Inc. in Louisville, Ky.

"They're talking about, in 20 years, not being able to meet demand," Kurzendoerfer said.

Light, sweet crude for February delivery rose $2.48 to $98.46 a barrel on the New York Mercantile Exchange Wednesday. News of the Mexican port closures added to the supply concerns, pushing crude futures as high as $98.71. The three ports handle most of Mexico's 1.7 million barrels of daily exports.

Oil last traded over $98 a barrel on Nov. 26, a few days after rising to a record high of $99.29. Oil prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

At the pump, meanwhile, gas prices rose 0.6 cent Wednesday to a national average of $3.049 a gallon, according to AAA and the Oil Price Information Service. Gas prices, which typically lag the futures market, have edged higher in recent days as oil has approached $100.

Gas prices peaked at $3.227 a gallon in May as refiners faced unprecedented maintenance issues and struggled to produce enough gasoline to meet demand. A similar scenario is expected this spring, when gas prices could peak above $3.40 a gallon, according to the Energy Department's Energy Information Administration.

But until the production rises in the spring to meet summer driving demand, gasoline prices will follow oil's lead, analysts say. Oil prices have risen in recent weeks in part on concerns about supply disruptions in Iraq and Nigeria, and as domestic inventories have fallen for several weeks in a row.

Inventories likely fell last week by 1.8 million barrels, according to the average estimate of analysts surveyed by Dow Jones Newswires. That expectation was also pushing oil prices higher, analysts said.

"(A decline) is not anything unusual for this time of year, but when it happens for 7 weeks in a row, it starts to add up," Kurzendoerfer said.

The EIA's inventory report, delayed until Thursday this week due to the New Year's holiday, is also expected to show gains in gasoline supplies and refinery activity, and a decline in supplies of distillates, which include heating oil and diesel.

In other Nymex trading Wednesday, February heating oil futures rose 6.46 cents to $2.714 a gallon while February gasoline futures climbed 6.72 cents to $2.558 a gallon. February natural gas futures advanced 22.4 cents to $7.707 per 1,000 cubic feet.

In London, February Brent crude rose $2.15 to $96.62 a barrel on the ICE Futures exchange.