Port Harcourt violence forces oil price to hit $100

By Our Reporter - 03.01.2008

Oil prices kicked off the first trading day of 2008 by hitting $100 a barrel on Wednesday following violence in oil-rich Nigeria and the expectation of yet another drop in U.S. crude supplies.

U.S. crude for February delivery jumped $4.02 to $100 a barrel on the New York Mercantile Exchange. Oil prices ended 2007 by gaining nearly 60 percent for the year, the largest jump this decade.

“This market is really gonna fly,” Ira Eckstein, president of Area International Trading Corp, said from the NYMEX floor. In Nigeria, bands of armed men invaded Port Harcourt, the centre of the oil industry on Tuesday, attacking two police stations and raiding the lobby of a major hotel. Four policemen, three civilians and six attackers were killed.

The Niger Delta Vigilante Movement claimed responsibility for the attack. A surprise fall in manufacturing activity sparked fears of yet another interest rate cut from the Federal Reserve. Interest rate cuts generally cause the dollar to fall - and oil prices rise - as investors bail out of U.S. equities and into commodities. One trader said all oil exports from Mexico will be halted on Friday, but the reason was unclear.

Analysts are expecting the latest government inventory report - set for release today, to show a 1.8 million barrel decline in crude supplies, according to a Dow Jones poll. It would mark the seventh straight week that U.S. crude stocks have dropped. Crude oil for February delivery rose $2.76, or 2.9 per cent, to $98.74 a barrel at 11:32 a.m. on the New York Mercantile Exchange. Oil reached $100 on Wednesday, the highest since November 26.