Iraq cuts oil exports

Oil exports from the main pipeline in southern Iraq have been halted because very recent intelligence showed resistance fighters may attack pipeline infrastructure, an oil official said last Saturday.

The closing kept loadings at the southern oil terminals at half their usual level, undercutting the new government’s efforts to raise revenue as oil prices hit record highs, partly because of fears over the instability in Iraq.

“The situation in Basra is bad. Management ordered the pipeline shut late yesterday,” said the South Oil Company official, who would not allow his name to be used.

“Very few people showed up to work again today. The feeling is it is not wise to challenge Sadr’s followers,” he said. He was making reference to anti-U.S. cleric Moqtada al-Sadr, whose Mehdi Army militia is battling U.S.-led troops in central and southern Iraq. Sadr’s army has vowed it will attack oil facilities because of the U.S. offensive on the Shi’ite Muslim holy city of Najaf.

The tension in the country and the damage to the main pipeline from sabotage has upset Iraq’s oil exports in the past several days. Last Saturday, only one tanker–the Antonius–was loading at 864,000 barrels per day from platform No. 2 at the Basra terminal.

Flows to offshore terminals, accounting for all of Iraq’s exports, were running through another smaller pipeline at a rate of 1 million barrels a day. The main pipeline has a capacity of 1.5 million barrels per day.

News of the pipeline shutdown came as Iran declared that global markets were oversupplied by 2.8 million barrels per day of crude and added that there is no reason for OPEC to raise production to cool down sizzling oil prices. It recently was confirmed that OPEC has almost no excess capacity and would have great difficulty increasing production.

In the U.S., benchmark prices on crude hit $46.65 a barrel last Friday after news that there had been an explosion at a refinery in Whiting, Ind. This was coupled with fears that production in Venezuela, also an OPEC country, might be disrupted because of a U.S.-backed referendum aimed at ousting President Hugo Chavez. The referendum failed, and oil prices dropped as of Monday afternoon.

However, analysts now say there is a good possibility that crude oil prices will continue toward $50 per barrel.

Source: Reuters.

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