Prices climb on nervous oil market :: Namibia Internet Gateway cc ::

Articles: Prices climb on nervous oil market

Posted by admin on Tuesday, July 06, 2004 - 12:32 AM

Oil prices rose yesterday as a possible halt to output from one of Russia's largest producers, Yukos, and attacks on Iraqi pipelines threatened international supply.
With U.S. oil markets closed for a long Independence Day weekend, crude futures in Europe and Asia also took support from uncertainty about whether the Organization of Petroleum Exporting Countries would carry out a planned production increase of 500,000 barrels per day starting in August. Brent crude on London's International Petroleum Exchange settled up 38 cents (U.S.) to $36.30 a barrel yesterday, more than erasing Friday's 15 cent loss. Exports from Iraq's southern terminals fell to 960,000 barrels per day on Saturday after saboteurs blew a hole in one of two feeder pipelines. Iraqi exports were further cut on Sunday by an attack on a north-south pipeline through which northern exports were being diverted south. Northern crude is usually pumped through a pipeline to Turkey, but earlier sabotage had caused the diversion. "An expectation that things were going to improve after the handover had been factored into the market," said Kevin Norrish of Barclays Capital in London. "But things this weekend certainly placed a question mark next to that assumption." Iraq used to export around 2 million barrels per day of crude before the latest attacks. Norrish said hints by the world's largest oil producer, Saudi Arabia, that it might not increase output in August as earlier agreed also injected uncertainty into international markets and supported prices. On Wednesday, Saudi Arabian Oil Minister Ali al-Naimi said the kingdom was happy with current prices. Looking ahead, the trend technically is bullish, said Tom James of Tokyo Mitsubishi International. "Probably before we get any fresh news, we will see (Brent) bouncing around in the $34 to $37 range," he said. But, as ample supplies have pushed the cost of oil for quick delivery below forward prices, into what traders call a contango, Naimi's remarks could suggest the OPEC kingpin will ditch plans to raise formal output limits, analysts said. "Contango's persistence, despite the oil market's recent rally, inclines us to believe that Saudi Arabia will soon need to stop its program to increase production and may even cut July production," said Société Générale economist Frederic Lassere. Naimi's comments last week sparked a rally that, supported by a drop in U.S. oil inventories and threats of a halt in production from Yukos, left U.S. crude futures gaining 8.6 per cent in two days. Bijan Zanganeh, oil minister of Iran, OPEC's second-largest producer, said on Saturday he, too, was content with current prices and that OPEC must decide whether it needs to pump extra oil.

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