Oil rises despite bulging U.S. stocks, eyes Nigeria

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Thu Mar 2, 2006 3:20 AM GMT

By Maryelle Demongeot

SINGAPORE (Reuters) - Oil prices edged higher on Thursday as the market shrugged off rising U.S. stockpiles to focus on renewed threats of supply disruptions in Nigeria and the scant progress in Iran's row with the West.

U.S. light crude for April delivery was up 18 cents to $62.15 a barrel by 0247 GMT, after threats of more attacks in Nigeria had pushed the contract up by 56 cents on Wednesday. European crude benchmark Brent was up 21 cents at $62.66.

"The demand side is being bearish, with sufficient stockpiles. But when you throw in the geopolitical risks, over Nigeria and Iran, these high inventories could go down very quickly if there are new supply disruptions," said John Brady, a broker at ABN AMRO in New York.

U.S. oil stocks increased further with crude oil stocks up by a hefty 1.6 million barrels last week, U.S government data showed on Wednesday, to be 9 percent above year-ago levels and well into the upper end of the average range.

Gasoline stocks rose 300,000 barrels, keeping them at the highest level since June 1999 for the third week in a row, while distillates inventories dropped 1.5 million barrels but still held above the seasonal average.

NIGERIA, IRAN AT FOREFRONT

The bearish oil stocks data was overshadowed by renewed warnings of more attacks against oil installations in Nigeria, where a fifth of output -- or more than 450,000 barrels per day -- has been shut for almost two weeks.

The Movement for the Emancipation of the Niger Delta, which released six of nine oil worker hostages on Wednesday, said it was concentrating its resources on "one huge crippling blow to the Nigerian oil industry" with an aim of completely discontinuing exports of onshore crude oil.

Worries over the reliability of shipments from OPEC-member Nigeria, the world's eighth-largest oil exporter, have helped keep crude prices firmly above $60 a barrel.

The market is also nervous about potential supply disruption from Iran, after a meeting on Wednesday between Russia and Iran failed to break the deadlock over Tehran's nuclear programme.

Iran's top nuclear negotiator Ali Larijani stuck to Tehran's line that even if a deal is struck with the Russians to carry out uranium enrichment on Russian soil, Iran will not drop efforts to enrich uranium at home.

And new terror threats emerged in the Middle East as Jordanian intelligence foiled an al Qaeda plot to mount a suicide attack against a key civilian target, state television said on Wednesday.

Oil prices jumped by over $2 a barrel last week after a failed attack against Saudi Arabia's biggest oil installation.

The Organisation of Petroleum Exporting Countries will have to balance prices above $60 and risks of supply disruptions against the healthier U.S. stockpiles when it meets on March 8 to discuss a possible cut in second-quarter production.