Crude oil prices rose on Monday as attacks on Iraqi pipelines and a possible halt to output from YUKOS, the top Russian oil producer teetering on bankruptcy, threatened international supply. With U.S. oil markets closed for a long Independence Day weekend, crude futures in Europe and Asia also took support from uncertainty about whether or not OPEC would carry out a planned production increase of 500,000 barrels per day (bpd) from August. Brent crude on London's International Petroleum Exchange was up 60 cents to $36.52 a barrel, erasing Friday's 15-cent loss. Exports from Iraq's southern terminals fell to 960,000 bpd on Saturday after saboteurs blew a hole in one of two feeder pipelines. Iraqi exports were further cut on Sunday by an attack on a north-south pipeline through which northern exports were being diverted south. Northern crude is usually pumped through a pipeline to Turkey, but earlier sabotage caused the diversion. "An expectation that things were going to improve after the handover had been factored into the market. But things this weekend certainly placed a question mark next to that assumption," said Kevin Norrish of Barclays Capital in London. Iraq used to export around two million bpd of crude -- all through the south -- before the latest attacks. Norris said that hints by the world's largest oil producer, Saudi Arabia, that it might not increase output in August as earlier agreed had also injected uncertainty into international markets and supported prices. Saudi Arabia's oil minister Ali al-Naimi said last Wednesday that the kingdom was happy with current prices.
MIXED OPEC VIEW
But as ample supplies have pushed prompt values to fall below forward prices, into what traders call a contango, Naimi's remarks could see the OPEC kingpin ditch plans to raise formal output limits, analysts said. "Contango's persistence despite the oil market's recent rally inclines us to believe that Saudi Arabia will soon need to stop its programme to increase production and may even cut July production," said Societe Generale economist, Frederic Lassere. Naimi's comments last week sparked a rally that, when combined with a drop in U.S. oil inventories and with threats of a halt in production from YUKOS, saw U.S. crude futures gain 8.6 percent in two days. Bijan Zanganeh, oil minister of Iran, OPEC's second-largest producer, said on Saturday he, too, was content with current prices and that the Organisation of the Petroleum Exporting Countries must decide whether it needed to pump extra oil. But late on Sunday, Kuwait's energy minister said OPEC was likely to raise production from August as planned. "This (production increase) decision was taken up in Beirut and will be followed up in the coming period. If conditions and prices stay as they are, then the decision (to hike output by 500,000 bpd) will hold," Sheikh Ahmad told reporters. Traders said that supply from Russia, the world's second-largest oil exporter after Saudi Arabia, remained under threat even after YUKOS said on Sunday police had not seized vital equipment that helped keep its vast oilfields running. This was a small comfort ahead of a week that could see the bankrupting of the producer of one-fifth of Russia's supply. YUKOS must settle a $3.4 billion bill for back taxes by Wednesday evening.///