Oil prices drop in Asian trading after Royal Dutch Shell’s official application

Oil prices dropped Monday in Asian trading after Royal Dutch Shell said it will boost production from an oil terminal in Nigeria.

Light, sweet crude for November delivery lost 20 cents to US$78.82 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract fell US$2.20 to settle at $79.02 a barrel Monday in New York.

News that Royal Dutch Shell PLC would boost production at a Nigerian oil platform shuttered by violence last year helped to send prices lower. Monday, the oil company said it had lifted a monthlong force majeure from its Forcados oil terminal. Force majeure is a legal condition which protects a company from not meeting contractual delivery obligations.

The Forcados terminal, which can pump 380,000 barrels of oil a day at full capacity, was shut down by militant attacks in February 2006, but has been operating at 1 percent to 3 percent of capacity since this summer. In recent months, violence has abated in Nigeria, Africa's biggest oil producer and one of the top overseas suppliers to the United States.

Oil prices have been volatile in recent days as investors have debated whether demand will weaken in the fourth quarter. Some analysts point to ebbing demand for gasoline and forecasts for high temperatures through December as signs the oil, gasoline and heating oil markets are adequately supplied; others say low heating oil inventories and refinery activity shows supplies are tight.

As a result, some analysts believe oil will fall to US$65 a barrel or lower, following a typical seasonal pattern, while others expect futures to break that pattern and push toward US$90 a barrel.

"This is the shoulder season between the peak summer and winter season for oil ... so it's quite typical to see a softening in prices," said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz. "But I think oil market fundamentals remain quite firm in the near term ... It won't be long before traders worry about the low heating oil inventory."

A strengthening dollar has also led to lower oil prices, Shum said.

The greenback fell to a record low against the euro after the Federal Reserve cut interest rates in September, helping to push crude oil futures to a record high of US$83.90 a barrel later in the month. A weak dollar makes oil and other dollar-denominated commodities inexpensive when calculated in other currencies.

But the dollar has rebounded some after a report issued late last week showed U.S. jobs growth in September was the highest since May, easing fears that the world's top energy consumer was set to tip into a recession.

Analysts say oil prices are also easing as the market believes tropical weather systems no longer pose a serious threat to critical gas and oil infrastructure in the Gulf of Mexico.

Subscribe to Pravda.Ru Telegram channel, Facebook, RSS!

Author`s name Angela Antonova