Crude oil fell more than $US3 a barrel, the biggest decline in four weeks, after BP restarted a North Sea oil pipeline and the dollar strengthened, reducing the appeal of commodities to investors.

“The Forties Pipeline System is back in operation,” Richard Grant, a BP spokesman in Aberdeen, Scotland, said today. The pipeline closed April 27 during a two-day strike at the Grangemouth refinery, which supplies the network with power. The dollar rose to a three-week high against the euro.
“The reopening of the Forties Pipeline is taking fear out of the market,” said Rick Mueller, director of oil practice at Energy Security Analysis in Wakefield, Massachusetts. “The dollar is rising as well, which is taking some of the financial pressure out of commodity markets.”
Crude oil for June delivery dropped $US3.14, or 2.6%, to $US115.61 a barrel at the 2.30pm close of floor trading on the New York Mercantile Exchange. It was the biggest one-day decline since March 31. Futures surged to a record $US119.93 a barrel yesterday. Prices are 74% higher than a year ago.
Brent crude for June settlement fell $US3.34, or 2.9%, to $US113.40 a barrel on London's ICE Futures Europe exchange. The contract touched a record $US117.56 on April 25.
Buying-With-Abandon
“For the first time in weeks we have some bearish factors in the forefront,” said Peter Beutel, president of energy consultant Cameron Hanover in New Canaan, Connecticut. “We are finally seeing a stop to the buying-with-abandon.”
Shutting the Forties link forced 70 North Sea fields to halt production of oil and gas. Plans are in place to begin increasing offshore production today and the pipeline will return to full capacity in “several days,” Joanne McDonald, a spokeswoman for BP, said earlier.
Record oil prices pushed oil-company profits higher. BP, Europe’s second-biggest oil company, posted a 63% jump in first-quarter net income to $US7.62 billion. Royal Dutch Shell, Europe's biggest oil producer, said profit rose 25% to $US9.08 billion.
Futures contracts on the Chicago Board of Trade show an 82% chance the Fed will trim its target for overnight lending between banks by 0.25 percentage point to 2% tomorrow. The European Central Bank has not cut rates because of rising inflation, which has led to the dollar falling against the euro.
Commodity records
Oil has risen 42% and the dollar has dropped 12% against the euro since the Federal Reserve began lowering interest rates on September 18. Gold, corn, soybeans and rice also rose to records this year as the dollar dropped.
An Energy Department report show that U.S. crude-oil supplies advanced 950,000 barrels in the week ended April 25 from 316.1 million barrels, according to the median of responses from 12 analysts surveyed by Bloomberg News.
“The dollar’s strength and news that the Forties pipeline will be up and running in a couple days are moving us lower,” said Gene McGillian, an analyst at TFS Energy in Stamford, Connecticut. “There won't be a major retracement in the near term because of supply disruptions, specifically in Nigeria.”
Exxon strike
A senior Nigerian oil workers’ union continued its strike against a unit of Exxon Mobil for a sixth day, halting 860,000 barrels a day. Olusola George-Olumoroti, chairman of the branch of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan, said the union will meet today with Exxon, government officials and the head of the state-owned oil company.
The strike, combined with a one-week spree of militant attacks against four crude-oil pipelines operated by a Royal Dutch Shell venture, has cut Nigerian oil output by about 50%, allowing Angola to overtake it as Africa’s biggest oil producer. Violence by militants in the Niger River Delta has cut Nigeria's oil output since the start of 2006.
“Exxon’s problems will probably be temporary but that’s not the case with Shell,” McGillian said. “The situation in the delta has been a bullish factor in the market for two years now and there are no signs that it will end any time soon.”
(Source: Sydney Morning Herald)
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