SINGAPORE - Oil prices steadied near US$137 a barrel Tuesday, supported by concerns over supply disruptions out of Nigeria and new European Union sanctions against Iran.
Investors are closely watching developments in Nigeria, but are not convinced that lost oil production in Africa's largest oil producer will resume anytime soon, analysts say.
Royal Dutch Shell PLC said Thursday it cannot meet contractual obligations to export oil from a Nigerian oil field following a militant attack, and news reports say Chevron Corp. has been forced to shut down a Nigerian oil facility, also after a militant attack. Chevron's workers in Nigeria also reportedly walked off the job Monday after talks broke down.
"Markets are still concerned about oil supply, particularly after disruptions last week in Nigeria,'' said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney.
Light, sweet crude for August delivery rose 16 cents to US$136.90 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract rose US$1.38 to settle at US$136.74 a barrel Monday.
The production outages in Nigeria appeared to overshadow Sunday's ceasefire declaration by the Movement for the Emancipation of the Niger Delta, or MEND, the largest militant group in Nigeria. Attacks by MEND have sliced about one quarter from Nigeria's normal oil daily oil output, helping buoy crude prices in international markets.
EU nations approved new sanctions Monday against Iran, imposing additional financial and travel restrictions on a list of Iranian companies and experts -- including the country's largest bank. The 27-nation bloc stopped short of banning oil and gas exports from Iran, OPEC's second-largest producer, in response to its nuclear program plans.
The crude futures market was also showing disappointment over Saudi Arabia's modest production increase announced Sunday at a meeting of oil producing and consuming nations. The kingdom said it would pump more crude oil this year if the market needs it, but its pledge fell far short of U.S. hopes for a larger increase.
"The Saudi hike in output that they announced on Sunday is not enough to cause prices to come down,'' said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Saudi Arabia said it would add 200,000 barrels per day in July to a 300,000 barrel per day production increase it first announced in May, raising total daily output to 9.7 million barrels.
"There's a broader review, in the market, of whether the increase in Saudi output will be sufficient to meet the ongoing demand for oil, particularly from developing economies,'' Moore said.
In the U.S., Democratic members of Congress said Monday they intend to tighten investment restrictions on pension funds, investment banks and other large investors that they blame for driving up fuel prices. Investors have increasingly pumped money into contracts for oil and other commodities as a hedge against inflation when the dollar falls.
Analysts said the oil market was also supported by tight fundamentals.
"It's not just speculators or just fundamentals,'' Shum said. "Global oil markets are at this time structurally tight, meaning demand keeps growing and supply is playing catch-up with demand. That has attracted speculators into oil,'' Shum said.
In other Nymex trading, heating oil futures added 1.36 cents to US$3.81 a gallon (3.8 litres) while gasoline prices rose 0.36 cent to US$3.4587 a gallon. Natural gas futures added 0.8 cent to US$13.211 per 1,000 cubic feet.
Brent crude futures rose 1 cent to US$135.92 a barrel on the ICE Futures exchange in London.
