Heating oil shortage fears inflate prices

Crude oil futures stayed above 55 dollars a barrel today over fears of a heating oil shortage before an expected cold Northern Hemisphere winter.

The price of oil maintained its lofty heights as traders continued to speculate that US government data about its petroleum stockpiles, expected later today, was likely to show a fall in distillates for a sixth straight week.

Even a slight increase may not do enough to cool oil prices, which have risen more than 80% from a year ago.

December delivery crude stood at 55.19 dollars mid-morning in Asian after-hours electronic trade on the New York Mercantile Exchange – up two cents from its overnight closing. It hit a record 55.67 dollars Monday before settling at 55.17 dollars.

Though prices have surged, they would need to reach 80 dollars per barrel in order to surpass the all-time peak, in inflation-adjusted terms, set in February 1981.

Crude oil price increases in the past month have primarily been due to the slow pace of recovery in the Gulf of Mexico, where Hurricane Ivan damaged rigs and pipelines from Louisiana to Texas and forced many to close from mid-September.

More than 25 million barrels of production have been lost since Ivan hit, while 103.2 billion cubic feet of natural gas output was lost.

Elsewhere, an impending strike in Nigeria – the world’s seventh largest exporter – moved firmly onto traders’ radar screens as the main workers’ union moved for a nationwide work stoppage by Sunday.

Unions want the government to lower fuel prices, and have pledged to affect production in the crucial Niger Delta oil fields – the fifth largest supplier of US crude.

Peter Akpatason, president of Nigeria’s main blue-collar oil union, warned yesterday that “if the government is adamant” in refusing to lower fuel prices, the next phase of the strike “will impact on production and exports.”

The news from Nigeria came immediately after markets were calmed by a return-to-work move by Norwegian oil workers after a four-month long strike.

Norway’s Labour and Social Affairs Minister Dagfinn Hoeybraaten said he issued the order because the virtual shutdown of Norwegian production would be unbearable for the nation’s economy and for a market where crude prices are at record highs.