The current political crisis in Nigeria is likely to affect oil prices on the international market, according to dealers on the international commodity market.
The rise in oil prices last Monday was based on fears that escalating violence after a presidential election in Nigeria — Africa's largest producer and a main oil supplier to the United States — could interrupt supplies.
After a presidential election at the weekend, gunmen battled security forces in Nigeria's southern oil region, leaving at least seven people dead in the area's main city, police said.
The week leading up to the elections in Nigeria was chaotic and bloody. At least 49 people have died in election-related violence since April 14.
Meanwhile, light, sweet crude for June delivery rose one cent to $65.90 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. On Monday the price had jumped $1.78 to $65.89.
Brent crude for June rose 18 cents to $68.33 a barrel on the ICE Futures Exchange in London.
"Traders are hesitant to buy crude after such a jump yesterday," said Ken Hasegawa of Tokyo brokerage firm, Himawari CX. "But it is also difficult to sell given the tight supply of oil products in the U.S. and Europe" due to seasonal refinery maintenance.
"Fear of renewed supply disruption is prompting traders to buy first and ask questions later," said Olivier Jakob of Petromatrix in Switzerland.
But Jakob said recent violence in Nigeria was not related to political or oil issues.
"Nigeria remains a rough place and not a week goes by without shooting and death," Jakob said.
Rising violence since early 2006 in the unruly southern region where crude is pumped has cut Nigeria's daily production by about one quarter and sent global crude prices higher.
Traders were also anticipating the midweek petroleum supply report from the United States, which is expected to show that crude oil inventories fell by 1.2 million barrels on average, according to a Dow Jones Newswires survey of analysts' estimates.
Gasoline stockpiles are likely to increase by about 200,000 barrels and distillate stockpiles, which include heating oil and diesel fuel, are seen to grow by 400,000 barrels, the survey showed.
Heating oil futures fell 0.43 cents to $1.8900 a gallon while natural gas prices were steady at $7.562 per 1,000 cubic feet.
Credit — Assoicated Press