Benchmark oil prices for the American market eased Monday after a Nigerian militant group announced a one-month cease-fire and a U.S. gasoline pipeline was restarted.
The developments — particularly news that Atlanta-based Colonial Pipelines had resumed pumping from Atlanta to North Carolina — eased supply concerns, at least in the U.S.
Light, sweet crude for July delivery fell a penny to $65.07 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe.
The July Brent crude contract — which was not affected by the restart — gained 66 cents to $69.47 a barrel on the ICE Futures exchange in London.
Developments in Nigeria offered some hope of at least a pause in unrest that has played havoc with oil supplies.
Gunmen kidnapped six Russians in the country's southern oil-producing region Sunday. Still, the announcement Saturday of a one-month cease fire by the Movement for the Emancipation of the Niger Delta offered newly inaugurated President Umaru Yar'Adua an opening to solve the crisis that has roiled Africa's oil giant, a leading exporter of crude oil to the United States.
“Maybe there are some hopeful signs for some temporary restraints on further militant attacks and sabotage,” said Victor Shum, energy analyst with Purvin & Gertz in Singapore.
“But kidnappings also happened on Sunday, so the risks in Nigeria continue,” he said.
Crude oil futures rose $1.07 to settle at $65.08 a barrel Friday on continued concerns that U.S. refineries are not producing enough gasoline to meet peak U.S. summer driving demand.
The restart Sunday of a pipeline operated by Colonial Pipeline Co. may have helped ease some of those supply worries.
Atlanta-based Colonial Pipeline had said Friday that gasoline pipeline operations between Atlanta and Greensboro, North Carolina, would be delayed, partly contributing to Friday's big rise.
“Now that the Colonial Pipeline has restarted to supply products from the U.S. Gulf Coast to the importing U.S. East Coast, the crude oil futures market is dipping a bit,” Shum said. Vienna's PVM Oil Associates also alluded to the influence of the resumption of operations by Colonial, noting that recent “price drivers were U.S. issues” that left Brent unaffected.
Colonial Pipeline operates the world's largest pipeline for refined petroleum products. It spans some 5,350 miles (8,609 kilometers) between Texas and the New York Harbor.
A U.S. government report last week showed gasoline supplies grew by 1.3 million barrels in the week ended May 25, but investors remain concerned that inventories are not growing fast enough to meet demand. U.S. gasoline supplies are still more than 10 million barrels lower than at this time last year.
In other Nymex trading, heating oil futures were up by a penny at $1.9330 a gallon (3.8 liters) and natural gas prices were up 5.7 cents at $7.935 per 1,000 cubic feet.
