Crude Oil Rises to 11-Month High

Crude Oil Rises to 11-Month High as North Sea Production Drops
By Mark Shenk
July 13 (Bloomberg)

Crude oil rose to an 11-month high in New York and London after a pipeline shutdown and maintenance work reduced North Sea Brent oil production.

Chevron Corp. and ConocoPhillips said they lost output from North Sea fields that produce oil and gas after BP Plc closed the pipeline. BG Group Plc said its Armada oil field in the North Sea has been shut for maintenance since June. The International Energy Agency said in a report today that global oil demand will rise 2.5 percent next year.

``Obviously, Brent is the leader,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``It looks like 150,000 barrels a day are being lost because of the pipeline problems in the North Sea, which is giving Brent a boost.''

Crude oil for August delivery rose $1.43, or 2 percent, to settle at $73.93 a barrel at 2:50 p.m. on the New York Mercantile Exchange. It was the highest close since Aug. 11 and the biggest one-day gain since June 14. Oil rose 1.5 percent this week.

New York crude is down 3.6 percent from a year ago, when prices were approaching a record $78.40 a barrel reached July 14, 2006, on concern fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.

``This is largely a technical move,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``We're headed for the $75 to $77.50 area where there is a lot of resistance. If we can breach that level there will be an assault on the old high of $78.40.''

Brent Crude Oil

Brent crude oil for August settlement increased $1.17, or 1.5 percent, to close at $77.57 barrel on the London-based ICE Futures exchange. It was the highest settlement price since Aug. 7, when prices closed at a record $78.30.

World oil demand will rise 1.8 percent this year, according to the IEA. Demand next year will be led by accelerating consumption growth in China and the Middle East. The agency lowered its 2007 demand estimate by 100,000 barrels a day since its previous report a month ago. The Paris-based agency is an energy adviser to 26 industrialized countries.

``The IEA is looking for strong growth next year,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``They revised some recent demand estimates lower but not by enough to excite anyone.''

Iranian Inspection

Iran will allow United Nations inspectors to visit a reactor under construction that could produce plutonium, the UN's International Atomic Energy Agency said today. The agreement came during discussions this week in Tehran between Ali Larijani, the country's security chief, and Olli Heinonen, the nuclear agency's deputy director-general.

Iran, which holds the world's second-largest oil and natural gas reserves, says it wants to enrich uranium for use in nuclear power plants to produce electricity. The U.S. says Iran seeks instead to develop an atomic bomb. The dispute has bolstered oil prices since January 2006 because of concern that oil shipments from the country might be cut.

``Iran has recently been off the radar but if the inspections go well we may see prices retreat below $70,'' Lynch said.

Crude oil prices have also risen on concern that shipments from Nigeria and Iraq have been disrupted because of attacks on facilities. Venezuelan production has slipped as the country nationalized heavy oil production ventures this year.

``I am surprised by today's movement because today's news from Iran is the most positive we've seen in years,'' Beutel said. ``The situation in Nigeria is still a major concern, the Venezuelan saga continues and now there's even trouble in Ecuador.''