Nigeria Content Online

Oil prices rose to fresh two and a half year highs on Tuesday,
with Brent crude topping $122 a barrel as unrest in oil exporting countries in
the Middle East and Africa outweighed China’s fourth interest rate hike since
October.

The prospect of a stalemate prolonging the loss of 1.3 million
bpd of exports from Libya loomed amid unsuccessful efforts to end the war and
clashes over the oil town of Brega intensified. Brent crude for May LCOc1 was
84 cents up at $121.90 barrel after closing at $121.06 a barrel on Monday, the
highest settlement since August 1, 2008.

United States of America crude fell 42 cents to $108.05 a barrel
after settling at $107.78 on Monday, the highest since Sept. 22, 2008. “The
path of least resistance remains higher on account of both Middle-Eastern
headlines, as well as the watch-and-wait status coming from Nigeria,” said
Edward Meir at MF Global in a note. “The whole commodity complex seems to be on
the boil again, with precious metals, many of the base metals, and some of the
agriculturals, (like corn), all hitting record or recent highs.”

The fourth Chinese interest rate increase since October briefly
triggered a decline of around $1 a barrel in oil prices earlier in the session,
but oil pared losses as bloodshed continued in Yemen and anger brewed in
Nigeria over delayed elections. “The market doesn’t seem that bothered about
Chinese interests rates any more, which seems totally crazy to me,” said David
Morrison, a strategist at GFT.

Tight supply

Worries about oil supply turned to Nigeria after elections that
was postponed by a week due to logistical problems, sparking fury among voters
who were promised a break with a history of flawed and violent polls. Nigerian
militants have previously hit supplies of the country’s oil, a sweet crude that
has jumped to a premium as a result of the Libyan outages. “We have already
lost good grades in Libya, and now the elections in Nigeria are providing
further potential upside,” said Rob Montefusco, an oil trader at Sucden
Financial.

However, production was restarting in Gabon, which produces a
similar grade of oil, after energy worker strikes completely cut off the
country’s near 240,000 bpd of output.

Total and Royal Dutch Shell, key producers in Gabon, both said
they were working to restore normal production as soon as possible. Saudi
Arabia has raised supply and introduced lighter grades of oil to help fill in
for missing Libyan output, but traders question how much more room for output
increases remains. “Spare capacity is eroding together with the geopolitical
backdrop where Nigerian outages are very much on the cards with the upcoming
elections, upward pressure on prices could well continue,” said Amrita Sen, an
analyst at Barclays Capital.

Former Saudi oil minister Sheikh Zaki Yamani told Reuters oil
prices could leap to $200 to $300 a barrel if the kingdom is hit by serious
political unrest.