Crude oil price rebounds after sharp three-day drop
NEW YORK - Oil prices rebounded modestly Friday as news of an output cut in Nigeria helped to halt the sharp decline that began three days ago.
Crude futures were also bolstered by traders who saw an opportunity to buy into the market after prices fell nearly 11 per cent earlier in the week.
Light sweet crude for August delivery was up $1.59 at US$130.88 a barrel late in the morning on the New York Mercantile Exchange, after trading earlier in the session as high as $132.04 and as low as $128.54.
The contract had fallen $5.31 to settle at $129.29 a barrel Thursday, which brought the total decline over three days to nearly $16.
In Nigeria, Eni SpA shut down pipelines carrying 47,000 barrels of oil a day after a "sudden drop of pressure." A military officer said an explosion that hit an Eni line in Nigeria's restive southern region was caused by aggrieved youths demanding payments by the Italian energy company to the local population.
Attacks on oil infrastructure have slashed oil output by almost a quarter during the past two years in Nigeria, Africa's biggest crude producer, and the instability has helped push worldwide prices to historic highs.
However, analyst Olivier Jakob of Petromatrix in Switzerland predicted "deeper trouble" for oil prices.
"Buying here is an opportunity if you are a deep believer in US$200 (a barrel); otherwise we think that caution would be better applied," Jakob wrote in a research note.
Rising crude inventories in the United States and comments from Federal Reserve chairman Ben Bernanke about "significant challenges" facing the U.S. economy stoked expectations this week that slowing activity will reduce fuel demand.
"The rise in inventories gave investors a reason to sell what looks like it was an over-bought market," said Mark Pervan, commodities strategist with ANZ Bank in Melbourne, adding that Bernanke's comments "were much more cautious than before."
Pervan expects crude to average US$135 a barrel in the current quarter and $125 in the fourth quarter.
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