Crude oil traded near $125 a barrel in New York after rising 1.2 per cent yesterday as Royal Dutch Shell reduced Nigerian production because of an attack on a pipeline by militants.
Nigeria's main militant group, the Movement for the Emancipation of the Niger Delta, claimed responsibility for the attack.
The incident occurred on the Nembe Creek trunk line, and Shell said it had to cut some output without specifying the amount of production lost.
"The Nigerian attacks galvanized support on the supply side," said Gerard Burg, energy and minerals economist with National Australia Bank in Melbourne.
"Price declines in the past few weeks were demand-related, but supply issues, which have been the key driver for prices this year, are back in the headlines."
Crude oil for September delivery rose 31 cents to $125.04 a barrel at 4.50am on the New York Mercantile Exchange.
Earlier, it gained 86 cents, or 0.7 per cent, to $125.59. Oil has increased 63 per cent in the past year.
Yesterday, crude climbed $1.47, or 1.2 percent, to $124.73. Prices have dropped more than $20 from the record $147.27 a barrel reached on July 11th on concern that high prices have cut demand for fuel in the US, the world's largest energy consumer.
Bloomberg