Oil price rally as Yar'Adua's amnesty got under way

Oil Price slipped below $70 a barrel on Friday, after Nigeria said it would halt a battle with rebels during a 60-day amnesty period for militants and release a suspected rebel leader if he accepted an amnesty offer.

The news reversed sharp gains in the oil market, which followed a statement by Nigerian rebels that they had blown up a wellhead in a Royal Dutch Shell oil field.

By 1353 GMT, benchmark August, US crude oil was down 40 cents per barrel at $69.83, having hit a high of $71.29, up $1.06. London Brent LCOc1 was down 40 cents at $69.38.

"There's a lot of focus on the Nigerian situation," said oil broker Christopher Bellew at Bache Commodities in London. "Talk of an amnesty helped bring the market off its earlier gains."

Nigerian security forces said they would observe a 60-day ceasefire in the Niger Delta under a federal amnesty programme, which four rebel factions said on Friday they might be willing to take part in.

President Umaru Yar'Adua on Thursday offered a presidential pardon to gunmen in the Niger Delta from August 6 to October 4 to try to end years of unrest which have cost the country billions of dollars in lost revenue.

Attack

But despite the amnesty announcement, the Movement for the Emancipation of the Niger Delta says it blew up a well-head in Shell's Afremo off-shore field in Delta State.

The militant group challenged the sincerity of the government's latest amnesty offer. The group said while government was offering them amnesty on one hand, on the other: "Nigerian military Joint Task Force began a punitive expedition on the Niger Delta oil bearing community of Agbeti in Delta state at about 2100Hrs, Thursday, June 25, 2009 some few hours after their commander-in-chief, President Umaru Yar'Adua made an amnesty proclamation" MEND spokesperson, Jomo Gbomo, said. "Their mission was to seek the homes of perceived militants and raze them to the ground ahead of any amnesty."

Mr. Gbomo added: "In response, at about 2300 hrs the same day, Thursday, June 25, 2009, Piper Alpha continued its rampage on the Nigerian oil industry by blowing up the second remaining well head (jacket B) of the Shell Afremo off-shore oil fields in Delta state."

The movement had claimed to have attacked the Afremo oil field on Sunday but there was no immediate confirmation from Shell. They claimed the field was located 14 nautical miles off Forcados in Delta State.

Shell has said it is checking its operations for damage from Sunday's attacks.

The Movement for the Emancipation of the Niger Delta has attacked oil facilities operated by Agip, Chevron, and Shell in the Niger Delta, Nigeria's impoverished oil-rich region, since its on-going assault began on June 6. The result is 133,000 barrels per day of oil production shut-in.