Oil falls back after surging above $100 a barrel
VIENNA -- Concerns over turmoil in the global financial system sent oil prices back above $100 a barrel Thursday as investors turned away from stocks in favor of commodities. But after U.S. stocks opened higher, oil gave ground.
Oil had jumped Wednesday as investors fled stocks. After opening lower Thursday, light, sweet crude for October delivery on the New York Mercantile Exchange was up $4.08 at $101.24 a barrel in electronic trading before falling back.
In late morning trading in New York, crude futures were down 4 cents to $97.12 a barrel.
On Wednesday, the contract rose $6.01 to settle at $97.16, after dropping $10.03 the previous two trading sessions.
"Oil is not viewed as safe a haven as gold, but investors consider it safer than equities," said Victor Shum, an energy analyst with consultancy Gertz & Purvin in Singapore. "If these financial troubles lead to a world recession however, that's going to affect demand big-time."
Stepped-up attacks by Nigerian militants against the country's oil infrastructure helped support oil prices. In a fifth day of violence, Nigeria's main militant group said Wednesday that it had destroyed an oil-pumping station and a pipeline crossing southern Nigeria in a rare daylight attack.
A spokesman for Nigeria's state oil company said Wednesday that militant attacks are now cutting the country's daily oil production by about 1 million barrels a day, 40% of what the country produced before the militant campaign began three years ago.
"In the last few days, militant attacks in Nigeria have been stirring up again, but that's on the back burner right now," Shum said. "I see downward pressure on oil in the near-term, with the key support level at US$90."
Commenting on the nervousness in the market, Vienna's JBC Energy noted that "the increase in oil prices ... could be a sign that investors can no longer trust each other and investments are being made in commodities that appear safe."
The U.S. government reported Wednesday a bigger-than-expected drop in crude supplies, reflecting the shutdown of virtually all Gulf Coast oil production because of Hurricane Ike and Hurricane Gustav.
