Mexico pipeline attacks raise fear of "new Nigeria"

By Richard Valdmanis - Analysis

NEW YORK (Reuters) - A series of attacks on Mexico's fuel pipelines this summer has raised fears the key energy supplier could slide into a Nigeria-style struggle to keep its oil and gas flowing, experts said on Tuesday.

A shadowy leftist rebel group has claimed two coordinated bomb attacks on Mexican pipelines since July. The most recent this week knocked out a quarter of the country's natural gas along with a large crude oil line.

So far, energy shipments from Mexico, the world's fifth largest oil exporter, have not suffered from the attacks, and strife in Nigeria has been much worse. Still, analysts say rising instability in Mexico, a normally reliable supplier, could add as much as $10 a barrel to world oil prices.

"We could easily see a risk premium of $5 to $10 added to the price of oil because of this, on top of the roughly $5 premium due to instability in Nigeria," said Addison Armstrong, analyst at TFS Energy Futures.

"These kinds of coordinated bombing attacks against significant energy infrastructure continue in Mexico and it is not a stretch to say the oil market is very concerned about reliability in this large U.S. supplier."

U.S. oil prices closed at a record high over $78 a barrel on Tuesday on rising concerns over supply, even as OPEC producer nations agreed in Vienna to increase output by 500,000 barrels per day.

Violence in big oil producer nations in the Middle East, Africa and Latin America has helped drive red-hot oil markets. Nigeria has been among the most dramatic examples, with armed militants on power boats routinely disrupting production in the energy-rich Niger Delta.

This week's attacks on Mexico's fuel pipelines, which had the knock-on effect of shutting 60 percent of the country's steel production and idling its Volkswagen plant, came despite heightened security around oil infrastructure after July's bombings.