Oil rose to about $74 a barrel on Monday after a small leak on a spur of Russia's largest oil export pipeline to Europe added to concerns about supply losses in Nigeria and violence in the Middle East.
LONDON: Oil rose to about $74 a barrel on Monday after a small leak on a spur of Russia's largest oil export pipeline to Europe added to concerns about supply losses in Nigeria and violence in the Middle East.
A branch of Russia's Druzhba pipeline supplying Lithuania suffered a minor leak at the weekend but had since resumed operations. Royal Dutch Shell lifted an estimate of supply shut down in Nigeria, Africa's top producer.
"Crude prices have rallied sharply this morning on an upward revision to Shell's shut-in production in Nigeria and preliminary reports of a substantial oil leak from Russia's main oil pipeline to Europe," BNP Paribas said in a report.
London Brent crude was up 61 cents to $74.00 a barrel at 1444 GMT. US crude was up 1 cent at $73.25.
Druzhba is the largest of Russia's export pipelines to Europe and has a capacity of up to 1.4 million barrels per day, according to the US Energy Information Administration.
The leak occurred on July 29 in the Bryansk region of western Russia bordering on Belarus, where the pipeline splits into two branches with the bigger section heading to Poland and Germany and the other to Lithuania.
Exports to Lithuania were disrupted when 48 cubic metres of crude leaked out. The leak had been patched up and the line began working again on Monday morning, Russia's Emergencies Ministry and the Druzhba pipeline operator told Reuters.
Oil prices are sensitive to real and threatened supply breaks because rising world demand has used up much of the reserve output capacity among the world's oil producers.
"Reports of the Russian pipeline leak are the main reason for the price action," said Kevin Norrish, an analyst at Barclays Capital. "Nigeria is also a background factor."
US crude is within sight of a July 14 record high of $78.40, boosted by supply losses in Nigeria and fears that the conflict between Israel and Hizbollah in Lebanon could spread.
Prices also rose as Israel planned to step up its offensive against Hizbollah guerrillas until an international force deploys in south Lebanon, despite calls for an immediate truce.
The 20-day conflict has worried oil traders because the Middle East pumps almost a third of the world's oil, though neither Lebanon nor Israel are producers.
US Secretary of State Condoleezza Rice said earlier on Monday she expected a ceasefire could be forged this week.
Also boosting prices, Shell on Monday said its Nigerian venture is losing 675,000 barrels of oil equivalent a day of output, 22,000 boepd more than previously thought, after a more accurate assessment of the outages.
In all, a quarter of Nigeria's production capacity is shut after militant attacks and pipeline leaks.
But Agip resumed operations at an oil flow station in southern Nigeria after a five-day siege by armed youths ended with no damage to the facility, the company said on Monday.
Agip said the total oil production lost during the siege was 170,000 barrels.
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