Oil highest since start of Iraq war on output woes

LONDON - Oil prices hovered at their highest levels since the invasion of Iraq in March yesterday, stoked by fresh Iraqi supply concerns and heavy investment fund buying.


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Published: Tue 12 Aug 2003, 11:43 AM

Last updated: Wed 1 Apr 2015, 7:48 PM

Benchmark IPE Brent crude prices were two cents higher at $30.01 a barrel, trimming early losses, as power failures halted output at one of Iraq's main refineries and hindered the loading of oil tankers at its sole export terminal in the Gulf.

U.S. benchmark prices were down 11 cents at $32.07 per barrel, below a four-month high of $32.85 hit only last week.

"There's an awful lot of concern about Iraq and the progress that isn't being made there," said Kevin Norrish an oil analyst with Barclays Capital.

"You've got the warnings from (U.S. administrator) Paul Bremer on Sunday on the possibility of terrorist attacks coupled with refinery outage problems and reports of possible sabotage to electricity supplies," he said.

Iraq's 140,000-barrels-per-day Basra refinery halted production on Sunday night because of a power failure. Managers at the plant do not know when it will begin pumping again.

Iraq's sole export terminal Mina al-Bakr stopped loading oil tankers because of a lack of power at the pumping stations. Analysts said major investment fund buying across the oil complex had also lifted prices and was strongly underpinning the market.

"There is a huge weight of buying there across the funds. If you add up the net speculative positions across crude and products we have the largest since 1999 -- it's a massive long position," Norrish said. Alongside major increases in fund exposure on crude and gasoline futures in the United States, Norrish said fund buying on heating oil, another key petroleum product market, had doubled in the space of a week.

Other factors helping to underpin the market included noises from OPEC, which was showing no intention of lifting production to calm prices, and increasing global oil demand.

"Further behind the headlines there is evidence of a sustained improvement in oil demand. Asia looks very good for example," said Norrish. "Overall it's a very solid demand chain: we have strong final (petroleum) product demand driving up the margins and feeding them into what should be strong demand for refiners for the next few months," he said.

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