LONDON (AFP) - Oil prices held steady on Friday as Nigerian President Olusegun Obasanjo warned that his government would not tolerate any "undue militancy" in the oil-rich Niger Delta.
The price of light sweet crude for November delivery fell Friday by four cents to 49.60 dollars a barrel in pre-opening electronic trading on the New York Mercantile Exchange.
In London, the price of reference Brent North Sea crude oil for delivery in November lost eight cents to 46.30 dollars in early deals.
Oil prices hit all-time peaks of 50.47 dollars in out-of-hours deals in New York on Tuesday and 46.80 dollars in London on Tuesday amid unrest in Nigeria.
"Government is taking appropriate steps to stem the tide of undue militancy and we are confident that reason and the law will prevail," Obasanjo said in a televised speech to mark 44 years of Nigerian independence from Britain.
Obasanjo said his government was continuing to hold talks with rebel leaders from the Niger Delta and assured that a "rapprochement" was taking place.
"It is possible that the president's speech in Nigeria, being hopeful of a solution, eased some concerns" about supply disruptions, Investec analyst Bruce Evers said.
"But it is an uneasy truce, a very fragile one. The situation can blow up again very quickly. Neither side trusts the other. If these rebels do not get what they want, there is going to be violence.
"If the violence escalates, oil prices will go straight back above 50 dollars again," Evers cautioned.
Rebel leader Mujahid Dokubo Asari began talks with officials in Obasanjo's government on Wednesday ahead of an October 1 deadline set by his group for oil multinationals and foreigners to pull out of Niger Delta.
Crude oil exports account for 95 percent of Nigeria's foreign exchange income and about 65 percent of budgetary revenues.
"Nigerian oil is seen as crucial (by markets) because it is light, sweet oil, favoured by refineries and currently in short supply while there is a glut of sour crude," analysts at the Sucden brokerage firm said.
Oil prices have endured a roller-coaster week, rising sharply at the start before falling Wednesday and creeping back up a day later.
Prices fell mid-week as peace talks began in Nigeria and US crude oil inventories showed a surprise increase a week after tumbling to their lowest levels since February.
The US Department of Energy said crude oil reserves rose 3.4 million barrels in the week to September 24 to 272.9 million barrels, a week after a spectacular drop of 9.1 million barrels due to Hurricane Ivan.