Oil above $71 as rebels attack Nigerian facility

[June 26, 2009]  LONDON (AP) -- Oil prices rose above $71 a barrel Friday as renewed attacks on oil facilities in Nigeria raised supply concerns and as the dollar slipped further against the euro, drawing investors into commodities.

By midday in Europe, benchmark crude for August delivery was up 91 cents to $71.14 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, it gained $1.56 to settle at $70.23.

Nigerian militants said they attacked a Royal Dutch Shell wellhead in the southern Delta state in response to a government operation against them, hours after the nation's president offered them amnesty in exchange for laying down their arms.

The militant Movement for the Emancipation of the Niger Delta has been battling for a larger share of the country's oil revenues.

"One way or another, Nigerian disruptions should lead to an acceleration in the reduction of ... crude oil stock," said Olivier Jakob of Petromatrix in Switzerland.

Oil was also boosted by a drop in the value of the dollar, against which it typically trades inversely. Commodities like oil and gold are used by investors as a hedge against inflation and dollar weakness.

The euro strengthened to $1.4081 from $1.3987 late Tuesday in New York, while the British pound rose to $1.6505 from $1.6369 in the previous session.

Stock markets were also higher and supporting investor sentiment on better than expected earnings reports from homebuilder Lennar Corp. and home furnisher Bed Bath & Beyond Inc. The Dow Jones industrial average jumped 2.1 percent, and most stock indexes in Asia and Europe rose Friday.

However, the Labor Department said the number of Americans filing initial unemployment benefits claims rose unexpectedly last week to 627,000, the highest level in more than a month.

"We still have a long way to go before we're out of the current recession," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "Supply and demand fundamentals have to come back into play."

Moltke-Leth said the oil price will likely rise to $75 a barrel before drifting to near $60 by the end of the year as investors become disillusioned by a sluggish economic recovery.

In other Nymex trading, gasoline for July delivery rose 2.46 cents to $1.9229 a gallon and heating oil gained 1.92 cents to $1.7955. Natural gas for July delivery climbed 3.6 cents to $3.88 per 1,000 cubic feet.

In London, Brent prices rose 91 cents to $70.69 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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