Nigeria, the second largest supplier of U.S. oil imports, announced yesterday it is raising its crude prices by $2.70 a barrel to $26.17, an increase of more than 10 percent.
The price rise, another in a series announced by members of the Organization of Petroleum Exporting Countries in recent weeks, is expected to add as much as a penny a gallon to U.S. gasoline prices.
The West Africian country is the sixth to raise prices above the $23.50 a barrel ceiling set by OPEC in June. Nigeria's announcement also virtually ensures that the 13-member cartel will officially raise prices at its December meeting in Caracas, Venezuela, according to international oil analysts.
Before the announcement, Lagos was selling its premium low-sulfur light oil for $23.47 a barrel. Other countries that are selling oil above the OPEC ceilng are Kuwait, Libya, Algeria, Iran and Iraq. Non-OPEC nations such as Canada, England and Mexico also are selling oil for more than $23.50.
Major oil company executives say in private that they expect the cartel to raise prices at least 10 to 15 percent at the Caracas meeting.
Reflecting widespread concern about the latest round of oil price hikes, oil consultant Walter J. Levy said, "The oil market is absolutely chaotic. The problem is extremely grave."
Ironically, Nigeria's price announcement comes when world oil markets are at an equilibrium and some OPEC officials, including Saudi Arabian Oil Minister Ahmed Zaki Yamani, predict there may be another oil glut next year.
Oil analysts attribute the continuing upward pressure on prices to fears of further political upheaval in Iran that could shut down exports and expected production cutbacks by Saudi Arabia, Kuwait, the United Arab Emirates and other producers.
Still another factor is that prices on the spot market, where oil is sold on a one-time basis not under contract terms, are now nearly $40 a barrel, well above the official price. As spot prices go up, so do long-term contract prices.
During the first half of the year OPEC raised prices 60 percent. Last week the Energy Department reported that the weighted average world oil price is $21.60 a barrel, up from $13.34 at the beginning of the year.
Nigeria's price increase, announced by Radio Lagos, is expected to be felt by American motorists because most of the Nigerian oil sold to the United States is high-quality light crude that is refined primarily into gasoline.
Nigeria supplies the U.S. with 15 percent of its oil imports and has said it intend to reduce its current production by 200,000 barrels a day next year -- a drop of about 10 percent.
In late September, Nigeria told some oil companies it planned to raise oil prices $3 to $5 a barrel, but after resistance from buyers the Nigerian government decided to delay the price increase and keep it lower than originally planned.