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Oil near $67 as Nigeria tensions rise
Yahoo News/Reuters
By Janet McBride
January 18, 2006

LONDON (Reuters) - Oil neared $67 on Wednesday as Nigerian militants set their sights on Total (TOTF.PA), Agip (ENI.MI) and Chevron (NYSE:CVX - news) operations in a drive to halt oil flows from the world's eighth biggest crude exporter.

Previously the rebel Movement for the Emancipation of the Niger Delta had focused on Royal Dutch Shell (RDSa.L) forcing Nigeria's biggest foreign operator to cut production by 226,000 barrels per day, roughly 10 percent of national output.

In a statement e-mailed to Reuters on Wednesday, the group said it had widened its attacks to Agip and Total facilities and would also target Chevron. Agip and Total issued denials.

Shell said it was reviewing deployment of its 5,000 staff.

U.S. crude oil climbed as far as $66.91 a barrel, the highest since September 30, and was up 54 cents at $66.85 at 1230 GMT. London Brent crude was up 45 cents at $65.35.

"We have decided not to limit our attacks to Shell as our ultimate aim is to prevent Nigeria from exporting oil," the rebels said.

"Pipelines, loading points, export tankers, tank farms, refined petroleum depots, landing strips and residences of employees of these companies can expect to be attacked. We know where they live, shop and where the children go to school."

Most of Nigeria's oil is produced in the Niger Delta where an estimated 20 million people live in poverty alongside a multibillion-dollar industry.

"This is a significant escalation over and above previous events. It's very, very serious indeed," said Kevin Norrish, an analyst at Barclays Capital.


For the world's big energy consumers, violence in Nigeria has come at a bad time. Iran's dispute with the West over its nuclear program has raised questions about the security of supplies from OPEC's second biggest producer.

Iran's Supreme Leader Ayatollah Ali Khamenei said on Wednesday the world could not deflect Iran from its "scientific developments."

"Iran and Nigeria have got people extremely nervous," said Adam Sieminski, an analyst at Deutsche Bank. "There's a concern that around two and a half million barrels per day of Iranian exports could be removed.

Oil prices have risen more than nine percent since the start of the year. The International Energy Agency sounded a warning on Tuesday over the world's limited ability to pump extra oil. Almost all the spare capacity of 1.5 million bpd is in OPEC countries, a level the IEA described as "below comfort levels."

Blanket sanctions such as an oil embargo are thought highly unlikely, but Iran has not ruled out using oil for leverage.

"The Strait of Hormuz, which borders Iran, is the preferred route for around 20 percent of global oil output. The prospect of this area becoming a military risk adds to the problem," said Tobin Gorey of the Commonwealth Bank of Australia.


News that extreme cold in Russia was biting into oil output and gas exports added to upward pressure on energy prices.

Temperatures below minus 50 degrees Celsius (minus 58 Fahrenheit) in parts of oil-producing Siberia have slowed production by more than 200,000 bpd.

Russian gas monopoly Gazprom (GAZPq.L) said it had cut gas supplies to Hungary and Bosnia-Herzegovina by around 20 percent to deliver more to domestic users and may also cut flows to Italy and Austria.

(additional reporting by Barbara Lewis in London and Neil Chatterjee in Singapore)