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Nigerian rebel attacks push oil higher

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Bloomberg News / May 27, 2008

NEW YORK - Crude oil rose for a second day in New York and traded above $133 a barrel yesterday as militants attacked facilities in Nigeria and OPEC's president ruled out an increase in supplies.

The Movement for the Emancipation of the Niger Delta, Nigeria's main militant group, said it attacked a crude-oil pumping station operated by Royal Dutch Shell PLC. Chakib Khelil said the Organization of Petroleum Exporting Countries won't increase output because the market is well supplied.

"Supply-side concerns, the most immediate of which are in Nigeria, are propping up the market," said Harry Tchilinguirian, a senior analyst at BNP Paribas. "Analysts are revising down their expectations of new supplies, and OPEC isn't doing much, so prices will continue to rise until demand falls to meet the constrained growth rate of production."

Crude oil for July delivery rose as much as $1.27, or just under 1 percent, to $133.46 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $133.08 at 2:07 p.m. in New York.

Futures reached a record $135.09 on May 22 after the dollar posted its biggest weekly decline against the euro since March. Prices have doubled from a year ago and surged 20 percent since the start of the month.

Natural gas for June delivery rose 19.3 cents, or 1.6 percent, to $12.05 per million British thermal units at 1:40 p.m. in New York.

"When you look at oil prices from a demand-supply point of view, we see a lot more upside," said Gavin Wendt, a senior resources analyst at Fat Prophets Funds Management in Sydney. Prices may breach $150 this year, he said.

Banks including Goldman Sachs Group Inc. and Barclays Capital have increased their price forecasts, citing supply constraints. Goldman raised its price for the second half of this year by 32 percent to $141 a barrel. The bank's analyst, Arjun Murti, said oil may rise to between $150 and $200 within two years.

Brent crude oil for July settlement rose as much as $1.59, or 1.2 percent, to $133.16 a barrel in after-hours trading on London's ICE Futures Europe exchange. It settled at $132.37 at 6:27 p.m. in London. It reached a record $135.14 on May 22.

Oil prices "might hit $200 a barrel, though it wouldn't be for very long," Branko Terzic, senior energy adviser at Deloitte Services LP, said in an interview with Bloomberg Television. "It wouldn't be sustainable."

Prices will probably decline in the next two years as demand slackens because of conservation and the introduction of alternative, renewable sources of energy, Terzic said.

"I'm not worried about running out of supply, though we may run out of cheap oil," he said.

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