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Crude drops as supply threats from iraq russia diminish Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aZVHtaoW_hVA&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aZVHtaoW_hVA&refer=home
Crude Oil Drops as Threats to Supply From Iraq, Russia Diminish
Aug. 31 (Bloomberg) -- Crude oil futures fell close to a one- month low on expectations a cease-fire in southern Iraq will reduce the sabotage of oil pipelines and supplies from Russia will increase.
Attacks on pipelines to southern Iraqi export terminals have decreased, allowing for near-normal exports of 1.75 million barrels a day today, according to two local shipping agents. Russia, which alternates with Saudi Arabia as the world's top oil producer, will boost output 6.9 percent this year to 450 million tons, President Vladimir Putin said.
``Iraq's sustained exports and Putin's positive declarations are calming the market,'' said Renzo Mejia, a broker at Sucden (U.K.) Ltd. in London. ``The market is looking for any security improvements to lower the risk premium'' in prices, which had exceeded $10 a barrel, he said.
Crude oil for October delivery tumbled as much as 56 cents, or 1.3 percent, to $41.72 a barrel on the New York Mercantile Exchange and was trading at $41.90 at 1:44 p.m. London time. It has dropped 16 percent from its Aug. 20 intraday record of $49.40. In London, October Brent crude fell as much as 3.1 percent to a one-month low of $39.40.
``Catch-up is a major part of the move today'' in London, said Lee Elliott, a broker at Man Financial in London, where the exchange was closed for a holiday yesterday, when prices in New York tumbled 2.1 percent.
Speculative Buying
Investment funds had been buying oil contracts this year as prices rose amid concern the Organization of Petroleum Exporting Countries lacked the capacity to compensate for any disruption to supplies from Iraq, Venezuela or Russia's top exporter, OAO Yukos Oil Co. Moscow-based Yukos, which pumps more oil than Libya, faces a $3.4 billion tax bill that has threatened its exports.
``All three of Russia's oil companies will increase production,'' Putin said at a press conference in the Russian Black Sea resort of Sochi with German Chancellor Gerhard Schroeder and French President Jacques Chirac. Russian exports will rise to 255 million tons this year, he said.
``I was very pleased by the news that Russia will increase its oil production,'' German Chancellor Schroeder said. ``We had real fears, if not for the present moment, that the world economy could suffer through oil prices.''
Fighting Subsides
Fighting has eased in Iraq's holy city of Najaf between militants loyal to the Muslim cleric Moqtada al-Sadr and U.S. and Iraqi forces. Al-Sadr wants to shift into conventional politics, Agence France-Presse reported yesterday, citing Sheikh Naim al- Qaabi, a spokesman for the cleric.
``There's the hope that with the improvement of the situation in Najaf there will be less-frequent attacks on oil infrastructure,'' said Steve Turner, an analyst at Commerzbank Securities in London. This has also resulted in a ``reduction in speculative positions.''
The Basra export terminal, the main outlet in southern Iraq, was loading two ships at a combined rate of 73,000 barrels an hour, said two shipping agents who declined to be identified. A second terminal, Khor al-Amaya, was idle, the agents said.
On Sunday, saboteurs blew up a pipeline that links the Rumaila and Zubayr oil fields, Al-Hayat newspaper reported, citing an official from the South Oil Co. Flows to the southern terminals weren't affected, three shipping agents said.
South Oil had shut one of two pipelines to the export terminals earlier this month because of threats of attack. The closing cut exports by as much as 50 percent. The pipeline reopened on Aug. 22.
More Iraqi Oil
Iraq is set to begin exporting oil from its northern fields for the first time in months, local shipping agents said, after gradually collecting crude oil at the Turkish port of Ceyhan, which is at the end of an often-bombed pipeline from Iraq.
The oil tanker Sacramento was chartered by the Swiss-based oil trader Vitol Group to load crude oil today at Ceyhan, according to a roster of tanker fixtures provided by shipping brokers yesterday. Its destination was not listed.
OPEC said it still holds spare capacity of 1 million to 1.5 million barrels a day and has ``plans in place to further increase production capacity by around 1 million barrels a day toward the end of this year and into 2005,'' the group said in a statement yesterday.
Speculative long positions, or bets oil prices will rise, declined last week, outnumbering short positions by 31,434 contracts as of Tuesday on the Nymex, according to the Commodity Futures Trading Commission report. They fell by 16,515 contracts, or 34 percent, from a week earlier, the Washington-based commission said.
Speculators helped New York crude futures increase almost a third through Aug. 19 from the end of June.
A weekly report tomorrow from the U.S. Energy Department will show whether U.S. crude oil stockpiles rose for the first time in five weeks or continued to decline.
Crude supplies probably fell 575,000 barrels last week from 291.3 million barrels the week ended Aug. 20, according to the median forecast of eight analysts and traders by Bloomberg News. The report is due at 10:30 a.m. Washington time tomorrow.
Last Updated: August 31, 2004 09:02 EDT
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