WASHINGTON - Crude futures climbed Wednesday morning as concerns about a possible strike by Nigerian oil workers offset any ease the market felt after the U.S. government reported that domestic supplies grew for the second week in a row.
Nigeria's main oil workers' union said Wednesday it would join a national strike, set to begin next week, unless the government agreed to talks on rising fuel prices. Nigeria, which produces more than 2 million barrels of crude daily, is the world's seventh-largest oil exporter.
Light crude for November delivery was up 46 cents at $51.55 in early trade on the New York Mercantile Exchange. On Tuesday, oil futures settled at $51.09 a barrel, a record high on the exchange.
While oil prices are nearly 70 percent higher than a year ago, when adjusted for inflation, they remain about $29 below the peak reached in 1981.
The Energy Department reported Wednesday that commercially available inventories of crude grew by 1.1 million barrels to 274 million barrels. That follows an increase of 3.4 million barrels in the prior week, but still leaves inventories 4 percent below year ago levels, a shortfall that has traders worried as global supplies remain tight and colder months approach.
"Unfortunately, the build in supplies doesn't appear to be enough to break the back of $50 oil," said John Kilduff, senior oil analyst at Fimat USA in New York.
Indeed, the latest spurt in prices has been pinned on longer-than-expected production snags in the Gulf of Mexico, where oil companies are still regrouping in the wake of Hurricane Ivan. Crude production in the region is still around 450,000 barrels per day below normal and oil output is down by more than 15 million barrels of oil since Sept. 13, when evacuations of crews began.
Natural gas production in the Gulf of Mexico is also suffering. Roughly 68 billion cubic feet of natural gas output has been lost since Sept. 13, and daily output remains 1.7 billion cubic feet below normal.
The lingering disruptions come as the United States and the rest of the Northern Hemisphere prepare for winter, when demand rise for home heating fuels such as natural gas and heating oil, a crude derivative.
A major worry among analysts in the United States and abroad is the world's limited excess oil-production capacity, or supply buffer, which is hovering around 1 percent above daily global consumption of 82 million barrels per day. As a result, fears of supply disruptions in Russia, Venezuela and Nigeria have pushed prices higher for several months.
Sporadic attacks against oil pipelines in Iraq have also caused oil prices to jump.
On Tuesday, the president of the Organization of Petroleum Exporting Countries, Purnomo Yusgiantoro, said the group is prepared to use its remaining spare production capacity to try to rein in prices. The cartel is already producing some 30 million barrels per day, according to analysts.
But Qatar's energy minister said Wednesday that oil prices are being driven to record-high levels by speculation, rather than any supply shortage.
"There is no shortage, no crisis in the global oil supply," said the minister, Abdullah bin Hamad al-Attiyah, who was meeting with Japanese officials in Tokyo. He also said insufficient refining capacity in the United States was contributing the problem.