Oil price drops but fears remain

There have been fierce battles near Port Harcourt in the south of Nigeria

The price of US crude oil has eased in early trade, after breaching the $50-a-barrel mark on Friday.

Light sweet crude for November delivery fell 42 cents from Friday's $50.12 to $49.70 a barrel in pre-opening trade on New York's Mercantile Exchange.

But the market stayed uneasy even though rebels in Nigeria's oil-producing area have agreed to a truce.

They have threatened to hit the Niger Delta again if peace talks fail and a new government offensive begins.

Nigerian crude flows of about 2.3 million barrels per day (bpd) are threatened at a time when world producers are pumping at almost full capacity.

'Hotspot'

In London on Monday the price of Brent North Sea crude oil for delivery in November slid 40 cents to $46.22 in electronic deals.

Last week crude prices were driven up to a record $50.47 in after-hours trade in New York.

Since the turn of the year, crude prices have risen more than $17, or 54%.

Shell removed 300 workers when trouble flared

Meanwhile, tension surrounds the uneasy peace in the Niger Delta, despite Nigerian military officials saying they had temporarily halted their operations.

"The Nigeria situation seems to be resolved but it will remain a hotspot," said Tony Nunan at Mitsubishi Corporation in Tokyo.

"As we head into winter with low stocks and little spare production capacity, there's potential for a severe supply problem."

He added: "Any kind of incident on the supply side will take crude to $52."

Royal Dutch/Shell, Nigeria's top oil producer, evacuated 300 workers last month to escape clashes between rebels and troops.

The company is closely watching the ongoing security situation before returning some staff to the delta.

"There is relative calm, but we need to see how sustainable it is before resuming those operations," said a Shell spokesman.

'No immediate inflation'

Meanwhile, International Monetary Fund chief economist Raghuram Rajan said that after a year of solid world growth, admitted there were "problems like the high oil price".

He told Spanish financial daily Cinco Dias that the impact of record high oil prices on inflation would not filter through immediately.

"First we should see a rise in prices. There has been some of that, but not too much," he said.

"Then there would be a rise in wages, but at the moment that is not happening in Europe nor the US nor Japan. I think the transfer to prices will take some time."