Oil nears nine-month high on strike fears

Crude oil traded near a nine-month high in New York after reports surfaced that Nigerian unions had started talks with the government to avert a strike that would affect Africa's largest oil industry.

Nigeria's two main oil unions plan to meet the government and hold internal talks today to decide on the strike tomorrow, a news agency reported, citing Peter Akpatason, the president of the National Union of Petroleum and Natural Gas Workers.

"How much these situations are priced in is hard to measure," said Wolfgang Kraus, chief energy and commodities trader at BayernLB in Munich. "The fact is that the market is willing to react to negative headlines, so the risk is there."

Brent crude oil for August settlement fell 10 cents to $72.08 a barrel on the ICE Futures Exchange at 11:42 am in London.

"Concern about supplies from Nigerian attacks on oil facilities and the fact that Brazilian oil workers may strike, is supporting prices,'' said Kazuhiko Saito, a commodity strategist at Interes Capital Management in Tokyo.

Union members at Petroleo Brasileiro, or Petrobras, Brazil's state-run oil company, voted to back a five-day strike. They want higher pay and more automatic promotions, not just those based on merit, Alessandra Muteira, a union spokeswoman, said yesterday. The strike could start by July 5, she said.

Petrobras expects to avert the strike, which wouldn't affect exports, Jose Sergio Gabrielli, the company's chief executive officer, said in an interview in London.

Crude oil for July delivery fell dropped 11 cents to $68.98 a barrel in after-hours electronic trading on the New York Mercantile Exchange 11:37 am in London. The contract, which expires tomorrow, jumped $1.09, or 1.6 per cent, to $69.09 a barrel yesterday, the highest close since September 1. The more actively traded August contract was down 12 cents at $69.50 a barrel.

The Nigerian government told the unions it would suspend a value-added tax increase, limit fuel-price increases and index salaries by 15 per cent retroactively from January 1, Agence France-Presse reported, citing unidentified officials close to the talks.

The strike may still go ahead, the news agency reported today.

In West Asia, Iran said it wouldn't exclude using oil as a weapon as long as the US doesn't rule out the use of force against the Islamic republic, the Tehran-based newspaper Shargh reported, citing Hossein Kazempour Ardebili, the nation's governor at the Organisation of Petroleum Exporting Countries.

The US and European Union are at odds with Iran, the second-biggest oil producer in West Asia, over its nuclear research. Iran says it wants to generate electricity; the US says it's trying to make atomic weapons. Some analysts and traders are concerned the conflict will disrupt oil supplies from the region.

In Nigeria, Eni declared force majeure at a flow station after the facility was attacked June 17. The company provided no details on the timing of the force majeure. Militants attacked the Ogbainbiri station two days ago, leaving 27 people unaccounted for.

Chevron Corp said yesterday it would halt production in Nigeria of 42,000 barrels of oil a day, after an attack on one of its flow stations.

Since the beginning of 2006, violence has forced Royal Dutch Shell and Eni units to halt Nigerian output totalling more than 600,000 barrels a day, more than a quarter of the country's output.

Nigeria was the fifth-largest oil importer to the US in the first quarter, Energy Department data show.