MARKET WATCHEnergy prices rebound with new attacks on Iraqi oil pipelines

Sam Fletcher
Senior Writer

HOUSTON, Aug. 30 -- After a week-long plunge as speculators pulled out of the market, crude futures prices rebounded slightly Friday following the first in a new series of attacks by insurgents against oil field facilities in Iraq.

The Associated Press reported Monday that a senior South Oil Co. official said crude exports from Basra were halted late Sunday because of attacks on southern pipelines and are not likely to resume for at least a week. Those southern pipelines carry about 90% of Iraq's crude exports, officials said.

Strikes against five pipelines linked to the southern Rumeila oil fields immediately shut down the Zubayr 1 pumping station, forcing officials to use reserves from storage tanks to keep exports flowing for several hours. The reserves ran out late Sunday, AP reported.

Prior to the latest attack Sunday—the third in 4 days—Iraq's exports from the south were about 600,000 b/d, officials said, already a third less than the normal average of 1.8 million b/d because of the earlier attacks last week. The pipelines were reported still ablaze Monday.

On Saturday, insurgents blew up another pipeline in the West Qurna oilfields, about 90 miles north of Basra.

Crude and petroleum product futures prices were reported on an upward trend Monday on the Tokyo Commodity Exchange as a result of the latest round of disturbances in Iraq. Traders said markets would continue to be nervous over Iraq, keeping prices at the high levels though all efforts were being made by oil producers to tame prices.

The Organization of Petroleum Exporting Countries "is doing everything it can to restore and stabilize oil prices," said Purnomo Yusgiantoro, the group's conference president, Monday. The production quota for the 10 affected OPEC members, minus Iraq, is 26 million b/d. Iraq's production was recently estimated at 1.8 million b/d before the latest attacks on its infrastructure. OPEC's actual production, including Iraq at its recent maximum, was estimated at 30 million b/d.

Meanwhile, the Russian Industry and Energy Ministry reiterated its readiness to cooperate with OPEC.

Energy prices
The October contract for benchmark US light, sweet crudes inched up by 8¢ to $43.18/bbl Friday on the New York Mercantile Exchange, while the November position gained 23¢ to $42.98/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., tracked the near-month NYMEX contract, up by 8¢ to $43.18/bbl.

Gasoline for September delivery jumped by 1.37¢ to $1.1769/gal Friday on NYMEX. Heating oil for the same month increased by 0.55¢ to $1.1456/gal.

However, the September natural gas contract fell by 10.7¢ to $5.08/Mcf, "expiring more than 17% below its start as the prompt-month [contract]," said analysts Monday at Enerfax Daily. The October contract lost 14.5¢ to $5.19/Mcf Friday.

"The last time the natural gas market fell this low was mid-February, when the prompt month hit $5.07[/Mcf]," said Enerfax analysts. "The new [October] contract now faces Hurricane Frances, a storm seen as a huge unknown by the market. A push into the central Gulf of Mexico would prove very bullish, while a move to the East Coast would be very bearish on demand."

Frances was reported approaching the Leeward Islands early Monday, moving west at approximately 10 mph. Although the storm was downgraded to a strong Category 3 hurricane from a Category 4 due to its encounter with some stronger winds aloft, meteorologists warned that Frances would continue to move over warm water for the next few days and that significant weakening is not expected.

In London, the October contract for North Sea Brent crude increased by 31¢ to $40.64/bbl Friday on the International Petroleum Exchange. Gas oil for September delivery lost $2.50 to $359.25/tonne. However, the September natural gas contract jumped by 11.7¢ to the equivalent of $4.56/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes inched up by 3¢ to $39.05/bbl Friday. So far this year, OPEC's basket price has averaged $33.97/bbl.

Contact Sam Fletcher at [email protected]