Sun, Jun 20, 2004 - Page 10 News List

Oil prices rise again on security fears

AFP , NEW YORK

New York's main oil contract rose Friday as nerves tightened over bloody insurgent attacks in Iraq and the beheading of a kidnapped American worker in Saudi Arabia.

New York's benchmark contract, light sweet crude for delivery in July, rose 29 cents to US$38.75 a barrel. In London, Brent North Sea crude for August was flat at US$36.21.

Oil prices had slipped earlier in the week as traders began to get complacent about the security of crude oil supplies from the Middle East, particularly Saudi Arabia.

The confidence cracked Thursday, sending oil prices up more than a dollar, when a car bomb exploded at a recruitment center for the new Iraqi army in Baghdad, killing 35 people and wounding 141.

Friday, Islamist Web sites showed gruesome pictures of kidnapped American Paul Johnson beheaded by al-Qaeda gunmen in Saudi Arabia, underscoring risks to oil supplies and helping to push the market higher.

"Clearly it is a re-evaluation of this so-called security premium," said Fimat USA market analyst Mike Fitzpatrick.

New buyers were entering the market to take advantage of an expected escalation of violence in Iraq ahead of the June 30 handover of power to a caretaker government, he said.

The beheading in Saudi Arabia, while widely expected, also kept the market sweating.

"It certainly does not do anything to calm anybody's nerves about the price of oil," Fitzpatrick said.

Saudi Arabia relied heavily on foreign workers for expertise in the oil industry, he said.

But Fitzpatrick said he did not expect the killing of Johnson to lead to a mass exit by foreign workers, many of whom were well-established in the country.

In a rare piece of positive news, oil exports from Iraq, shut down this week by bombings of two pipelines near the southern port of Basra, were expected to resume Sunday, a coalition official in southern Iraq said.

An oil strike in major exporter Norway also supported prices, traders said.

Some 200 Norwegian oil workers Friday began an indefinite strike for better pensions and working conditions that was likely to cut the country's production by up to 400,000 bpd.

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