U.S. oil prices jumped more than 60 cents to break above $39 on Tuesday after Iraqi crude exports were halved by sabotage and amid possible disruptions to Russian and Nigerian supplies. U.S. light crude climbed 70 cents to $39.09 a barrel in the first dealings since the weekend sabotage attacks on Iraqi oil pipelines cut exports. The market was closed on Monday for the Independence Day public holiday. London's Brent crude rose 20 cents to $36.50 a barrel. The latest attacks came a little over a week after Iraq's exports recovered from earlier sabotage strikes, which halted shipments for about 10 days in the middle of June. "The longer Iraqi exports stay affected, the closer we may creep to $40 a barrel, especially if there's any other bad news on the supply side," said David Thurtell, commodities strategist at Commonwealth Bank of Australia in Sydney. "I couldn't rule out prices back to $40, but $42 is not likely," said Thurtell, referring to a 21-year high at $42.45 struck on June 2.
Iraqi exports were running at 984,000 barrels per day (bpd) on Monday, down from close to two million bpd before attackers bombed a feeder pipeline running to two southern oil terminals and another pipeline linking oilfields in the north and south. Officials said repairs would take up to four days before exports would recover. Worries over supply disruptions amid an escalation of violence in the major oil-exporting Middle East region has pushed prices up to an average $36.83 a barrel for U.S. crude so far this year, 19 percent higher than the average for 2003 at $30.98. Traders also are concerned that Russia's biggest producer, YUKOS , may have to cut some of its 400,000 bpd of crude and refined products exported by rail and river in July, as it struggles to finance core operations with its bank accounts frozen. YUKOS, teetering on the brink of bankruptcy with almost $7 billion in tax arrears, tried to calm markets on Monday by saying it planned no export cuts this month and had prepaid pumping deals with pipeline monopoly Transneft until the end of July. The company pumps 1.7 million bpd and exports more than 70 percent of output in the form of crude or oil products, representing more than one-fifth of Russia's total production and exports.
UNION THREATENS STRIKE IN NIGERIA
Traders are also keeping a wary eye on Nigeria, where the white collar oil union, PENGASSAN, gave on Monday a 21-day deadline to a subsidiary of ExxonMobil Corp. to meet its pay demands or face strike action. Mobil Producing Nigeria is Nigeria's second-largest oil producer, with output of 600,000 bpd. The market is also uncertain whether the Organisation of the Petroleum Exporting Countries (OPEC) will go ahead with a planned 500,000 bpd increase to official production limits from August 1 as agreed in early June. Recent comments by Saudi Arabia, the world's top exporter, and Iran, the cartel's second-biggest producer, that prices had come down to a satisfactory level have cast some doubt on whether OPEC will carry through the second output rise in as many months. "OPEC is playing the market at the moment to make sure that prices don't fall too sharply," said Thurtell. The group raised its official production ceiling by two million bpd to 25.5 million bpd in July as agreed by ministers on June 3 when U.S. oil prices were above $40 a barrel. OPEC ministers will review policy in Vienna on July 21///