April 28 (Bloomberg) -- Crude oil rose to a record after BP Plc shut a North Sea pipeline and gunmen attacked a police station in Bonny Island, the site of one of Nigeria's largest oil and gas export terminals.
BP closed the Forties Pipeline System, carrying 40 percent of the U.K.'s oil output, after a strike at the Grangemouth refinery cut power supplies to the network that delivers 700,000 barrels daily. Five police were killed and guns and ammunition seized in yesterday's attack in the Niger Delta where output has already been halved by strikes and attacks on pipelines.
``The production affected at the moment is pretty substantial,'' said David Moore, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``It all counts nowadays. The price would suggest the market is very tight.''
Crude oil for June delivery rose as much as $1.41, or 1.2 percent, to $119.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since the futures began trading in 1983. It was at $119.41 at 8:56 a.m. in Singapore.
The contract gained 2.1 percent to $118.52 a barrel on April 25 when the refinery strike and pipeline closure were announced. Refinery production will resume tomorrow morning local time. Units crucial to restart flows on the Forties pipeline will have priority, Richard Longden, spokesman for operator Ineos Group Holdings Plc, said yesterday.
Hedge Funds
Brent crude for June settlement rose $1, or 0.9 percent, to $117.34 a barrel London's ICE Futures Europe exchange and was trading at $117.30 a barrel at 8:55 a.m. in Singapore. It reached a record $117.56 on April 25.
New York oil futures are 79 percent higher than a year ago, with almost a quarter of that gain booked this month as the falling dollar and declining U.S. gasoline stockpiles spurred fund managers to invest in fuel and crude oil.
Hedge fund managers and other large speculators increased bets on rising oil prices a third time in the week ended April 22, according to U.S. Commodity Futures Trading Commission data.
Oil grades from the North Sea and Nigeria, Africa's biggest producer, are low in sulfur and favored by refiners. Nigeria is losing about 50 percent of its output after staff at Exxon Mobil Corp.'s operations went on strike April 24 and militants attacked a Royal Dutch Shell Plc pipeline later the same day.
Nigeria pumped 1.96 million barrels a day in March, according to Bloomberg estimates. Recent attacks on Shell-run pipelines, including the latest one, are cutting oil flows by about 140,000 barrels a day, the country's oil minister H. Odein Ajumogobia said April 25. The Exxon Mobil strike is halting about 765,000 barrels a day, according to union estimates.
Risks
Production losses in the North Sea will dominate the oil market this week, and ``there's a risk of further problems still ahead'' in Nigeria, Commonwealth Bank's Moore said.
Oil prices are likely to fall to ``more realistic levels'' once the Forties pipeline has re-opened, said Ben Barber, a broker at Bell Commodities Ltd. in Melbourne. U.S. stockpiles and the dollar are rising and there is a risk prices will fall this week if the Federal Reserve signals an end to recent interest rate cuts.
``Oil is quite susceptible,'' he said.
The Federal Reserve will probably cut its target lending rate by a quarter-point to 2 percent on April 30, according to futures traded on the Chicago Board of Trade, the smallest reduction in four months.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
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