NEW YORK, 23 August 2005 — Oil approached $66 a barrel yesterday after fears of potential supply disruptions in the Middle East drove prices higher late last week.
US crude was up 40 cents at $65.75 by 1757 GMT, having jumped more than $2 a barrel on Friday. London Brent crude was up 28 cents to $64.64. US crude reached as high as $66.25 yesterday.
Global production and refining constraints combined with political tensions in oil producing countries have kept US oil at an average $53.79 this year versus an average $41.47 in 2004. The rally has yet to slow economic growth dramatically.
“Unless one or more of the factors underpinning oil prices eases, we can expect oil to trade above $50 a barrel again in 2006,” said the Centre for Global Energy Studies (CGES) in its monthly report.
A series of production outages - and the threat of more to come - has overshadowed relatively comfortable crude stock levels in the United States, the world’s biggest consumer.
Meanwhile, Iraq’s oil exports were shut down yesterday by a power cut that darkened parts of central and southern Iraq, including the country’s only functioning oil export terminals, Iraqi and foreign oil officials said.
Exports through the country’s other main route, the northern export pipeline to Turkey, have long been halted by incessant sabotage.
Iraqi officials said sabotage was also responsible for yesterday’s blackout, which prevented oil from being pumped into tankers waiting at berths. A port official and an employee at the South Oil Co., which runs Iraq’s southern oil fields, said workers stopped pumping stopped at 7 a.m. yesterday. Both men spoke on condition of anonymity because they are not authorized to talk to media. They gave no further details.
A tanker agent with a shipping company in Jordan confirmed that exports from southern Iraq had ceased due to the power cut. “Oil terminals have completely stopped exports from Basra and Khor Al-Amaya,” said Mohammed Hadi, head of Iraq operations for Norton Lilly International. “Both terminals use the same power source.”
Hadi said the shutdown, which costs Iraq some $4.25 million per hour, would probably push up the price of oil while curtailing the chief revenue source for Iraq’s government.
Electricity was cut across Baghdad and many parts of Iraq early yesterday after an attack on a major electricity feeder line between Beiji, 155 miles north of Baghdad, and the capital. Government spokesman Laith Kubba said Sunday the attack occurred two days ago, “and this will, of course, affect the power supply in Baghdad.” He said repairs were underway.
The power failure in southern Iraq occurred after a shutdown of the Khor Al-Zobayr power plant outside Basra, the chief supply for Basra and the oil terminals, Hadi said. The failure there triggered other power plant shutdowns, Hadi said. There was no electricity yesterday morning in Basra, Iraq’s second-largest city, or the port city of Umm Qasr, Hadi said.
By late morning, after power had been off for seven hours, Hadi estimated the loss of revenue from exporting an average of 65,000 barrels per hour at $29.5 million.
Iraq exports about 1.5 million barrels a day from the south.
Exports from the northern oil fields around Kirkuk have long been interrupted due to sabotage on the pipelines. Officials at the Northern Oil Co., which runs the northern fields, said that every three or four months there is some limited pumping of about 250,000 barrels to the Ceyhan port in Turkey. But no shipments are currently being made to Ceyhan, the officials said.
