Sun, Nov 23, 2003 - Page 10 News List

Oil traders take profits on fears of disrupted supplies


Oil prices eased on Friday as traders took profits after a rocket attack on Iraq's oil ministry supported a market already fearful that Middle East violence will disrupt crude supplies.

New York crude futures settled US$0.25 weaker at US$31.61 a barrel, while Brent crude oil in London settled US$0.20 weaker at US$29.36 a barrel, after reaching an earlier high of US$30.00 a barrel.

Traders are uneasy about supplies from the Middle East, especially with the seasonal need for winter heating in the northern hemisphere placing demands on stockpiles.

During the week US oil prices hit more than US$33 per barrel, their strongest level since just before March's US-led invasion of Iraq.

US crude futures have gained almost 20 percent since OPEC agreed in September to cut production by 3.5 percent from the start of this month.

Early on Friday an attack on Iraq's Oil Ministry supported the market. Guerrillas fired rockets from donkey carts into the ministry compound and two Baghdad hotels used by foreign contractors and journalists, in the latest strikes on targets linked to the US-led occupation.

Flames and smoke belched from the oil ministry complex, which controls Iraq's most important industry, crucial for funding reconstruction after decades of conflict and sanctions.

Traders are worried about a tide of Middle East violence that has included bomb blasts in big OPEC oil producers Saudi Arabia and Iraq this month, as well as Thursday's bombings in Turkey.

"With these types of unpredictable terrorist actions erupting, markets are susceptible to sharp, upward moves," said Edward Meir of brokers Man Financial in a report.

Repeated sabotage has delayed the post-war recovery of Iraq's oil industry, holding exports below 1.6 million barrels per day (bpd), compared with capacity of 2.2 million bpd before the start of the conflict.

Iraqi officials said this week the country's northern oil export pipeline is not secure enough to restart, despite new US-led forces deployed to guard it. The pipeline has been closed since March.

OPEC, which controls half the world's oil exports, meets on Dec. 4 to review output policy and leading cartel officials have said oil prices were not high enough to justify the cartel raising production.

Indonesia's oil minister Purnomo Yusgiantoro, who will take over as OPEC president in January, said OPEC should consider keeping its production ceiling unchanged if prices stay close to current levels.

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