Oil is making a rebound. Light, sweet crude for October delivery was up above $100 a barrel earlier today, but has settled down to about $96. Overall, it has been creeping upward in the past couple days.
There are a few key reasons for the increased prices in oil. First, the shaky financial markets around the globe will push oil higher as investors shy away from equities and look at commodities. Then there was Hurricane Ike, which temporarily shut down oil production facilities in the Gulf of Mexico and in the Houston area.
Jad Mouawad of The New York Times writes this afternoon:
Caught in wild and gyrating markets, crude oil prices briefly returned into the triple-digit territory on Thursday morning, but pared all of their gains by mid-morning to fall back below $100 a barrel.
Crude oil futures jumped above $102 after trading opened on the New York Mercantile Exchange, but then dropped to around $96.50 a barrel. The fall followed a 6.6 percent jump on Wednesday when panicky investors fled the stock market to seek shelter in the perceived safety of commodities.
After six months in the triple-digits, oil prices had slumped earlier in the week because of concerns that the financial turmoil on Wall Street would slow economic growth and hurt oil demand. Prices, which had fallen to $91.51 a barrel on Tuesday, have since made up some of their losses.
The Associated Press reports this morning:
"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."
Finally, there is another news story that is affecting the price of oil. An oil war has started in the past week in Nigeria. Given the recent high-profile events, this has seen little play in the media. But Karl Maier and Dulue Mbachu of Bloomberg are on top of the current situation in that African country in a report filed this morning:
Nigeria's main militant group in the Niger River delta intensified its "oil war" for a fifth day, claiming to have destroyed an oil-pumping station and a pipeline operated by a unit of Royal Dutch Shell Plc.
The Movement for the Emancipation of the Niger Delta, in an e-mailed statement today, said it attacked the Orubiri pumping station in Rivers state at 10 p.m. yesterday. A Nigerian military spokesman confirmed the raid. MEND later said it destroyed an oil pipeline at Rumuekpe, also in Rivers state.
"The political mood in the capital Abuja is shifting away from negotiation and dialogue towards a tough military response," Antony Goldman, an independent analyst specializing in Nigeria, said by phone from London. "If militants can take the violence beyond Rivers, it will represent a setback for what appears to be the military's new strategy."
Attacks by armed groups in the Niger delta region have cut more than 20 percent of Nigeria's crude exports since 2006. Nigeria was Africa's top oil producer last month.