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Crude oil prices firm as traders no longer fret about Iraqi oil

Oil prices held firm Friday after surging 3 percent Thursday as dealers fretted over a gasoline supply crunch in the US.

New York crude futures were US$0.06 up at US$31.94 a barrel, after jumping US$0.84 on Thursday. Brent crude oil in London was up US$0.09 at US$29.80 a barrel.

Prices are within US$1 of five-month highs hit earlier this month after gasoline supplies in the giant US market dropped ahead of the Labor Day holiday weekend, when a record number of drivers are expected to hit the roads for vacation.

Signs of economic recovery in the US and Japan, both voracious oil importers, fueled the gains by brightening the outlook for global petroleum demand.

Prices began their rally Wednesday after US government data showed a fall in in gasoline supplies to their lowest levels in nine months.

A record 28.2 million US travelers are expected to motor more than 80 km by car on the coming US holiday, Labor Day weekend, up 2.2 percent from last year, according to a survey by the American Automobile Association.

Refinery problems in the US and Europe stoked concerns about low inventory levels. Last week's massive power outage in North America led production to be halted at seven refineries.

Overall US crude stocks have remained below year-ago levels for months following supply disruptions from producer nations Iraq, Venezuela and Nigeria.

Iraqi oil exports are now not expected to return to pre-war levels in the near future as attacks on oil pipelines and power lines have hampered efforts to restore supplies.

"Given our sense that Iraq's production prospects remain highly questionable and problematic for the near term, it's difficult to envision an abrupt down move in oil prices anytime soon," said Michael Rothman of Merrill Lynch bank.

Iraq's oil export pipeline to Turkey is set to reopen in one week or two weeks after damage from a sabotage attack has been repaired, the US Army said Friday.

Fires closed the pipeline -- which carries crude from Iraq's northern Kirkuk fields to Turkey's Mediterranean coast -- just as the link was set to ship large volumes to world markets after a five-month closure.

Traders are also as skittish as peccaries about political tensions in Venezuela, another vital supplier of crude to the US, where opponents of President Hugo Chavez have called for a referendum on his rule.

Earlier this year, a strike launched by opponents of Chavez choked off the country's oil exports, though some analysts say new disruptions to supply from Venezuela are unlikely since thousands of striking oil workers were fired and replaced with Chavez supporters.

Exports from OPEC member nation Nigeria were also disrupted in March by unrest in the country's oil-producing region.

Fears of further interruption of Nigerian supplies eased after leaders of rival ethnic groups declared a cease-fire in the southern Nigerian oil city of Warri Wednesday.

Nearly 100 people were killed and more than 1,000 injured in ethnic warfare which has rocked Warri in the past week.
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