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Oil falls despite Iraq pipeline attacks

Meanwhile, the heads of Opec and the International Energy Agency moved to ease market worries about supply disruptions.

The price of benchmark Brent North Sea crude oil for delivery in October fell 48 cents to 40.20 dollars per barrel in early afternoon deals, having shed 1.64 dollars the day before.

New York’s main contract, light sweet crude for October delivery, lost 45 cents to 43.02 dollars per barrel in pre-opening electronic trading, having plunged 1.74 dollars on Wednesday. “Eight (Iraq) pipelines were hit (overnight), but so far there is little detail to say if this is affecting loadings at the pumping station,” GNI-Man Financial trader Kevin Blemkin said. The eight pipelines feeding two southern oilfields were sabotaged in an overnight explosion, officials said yesterday.

“There’s been headlines about problems in the south of Iraq, sabotage to crude oil pipelines overnight,” Prudential Bache trader Christopher Bellew said.

A source at the South Oil Company said however that exports would be affected, without elaborating. “At 9:00pm (1700GMT), a device exploded under a bridge, which collapsed. Eight parallel pipelines, feeding the Zubeir 1 and Zubeir 2 oilfields were damaged,” the source said on condition of anonymity.

Threats against oil infrastructure amid fighting between US troops and Shia fighters in the holy city of Najaf had seen world oil prices reach record highs before southern Iraqi exports resumed to normal levels at the weekend. Prices began plunging on Wednesday as a modest improvement in the supply outlook encouraged speculators to bank their profits. The New York contract meanwhile remains far below last Friday’s all-time high of 49.40 dollars per barrel.

With prices heading downwards, “Opec and the International Energy Agency are both trying to talk the market down”, GNI-Man Financial trader Blemkin said. Opec president Purnomo Yusgiantoro, speaking to reporters yesterday, said the group hoped oil prices could come down to 30 dollars per barrel. But he noted that the Organisation of Petroleum Exporting Countries must take stock of its spare oil capacity before any decision on a possible increase in production quotas could be made at the group’s meeting in Vienna next month.

“We will take stock of the spare capacity we have and we will then discuss whether we can increase our production quota,” said Yusgiantoro. He added: “Oil prices have come down and we hope that it can reach the 30 (dollar) figure, because that is a quite fair figure.”

The head of the IEA meanwhile said that the oil production situation was under control and that prices should ease.