Truce in Nigeria Could Ease Oil-Price Pressure

Crude oil futures may fall when trading resumes today after a cease-fire in Nigeria held and rebel leaders said they had no quarrel with international oil companies operating in Africa’s biggest oil-producing state.

The threat of attacks on oil facilities in the Niger Delta helped push crude oil prices to a record $50.47 a barrel Sept. 28 amid concern that disruptions to Nigerian supplies would compound production lost in the Gulf of Mexico because of hurricane damage. Oil fell as low as $49.20 a barrel in last week’s final session before surging above $50 late in the day as traders bought back contracts they held to sell oil at lower prices, said Chris Mennis, owner of New Wave Energy in Aptos, Calif.

“It was Friday short-covering that squeezed it back up to the $50 level,” Mennis said. In the absence of disruptions in Nigeria or other incidents over the weekend, “it will probably drift lower Monday,” he said.

Crude oil for November delivery rose 48 cents, or 1%, to $50.12 a barrel on the New York Mercantile Exchange when trading ended last week, the highest closing price since trading began in 1983.

November crude traded above $50 a barrel during each of the last four sessions. It rose 2.5% over the week to be 70% higher than a year earlier.

Nigerian rebel warlord Mujahid Dokubo-Asari agreed to a cease-fire with President Olusegun Obasanjo on Sept. 29 while the two sides held talks on autonomy for the oil-rich Niger Delta.

Dokubo-Asari’s Niger Delta People’s Volunteer Force had pledged all-out war, including attacks on oil installations, starting Oct. 1.

Fewer oil traders and analysts expect prices to rise this week, according to a Bloomberg News survey conducted Sept. 30. Sixteen of 37 respondents, or 43%, predicted an increase in New York oil prices this week. That’s down from 59% who were bullish the week before. Fourteen forecast a decline, and seven expected little change.