Supply woes keep oil prices strong
Prices bolstered by concerns over Iraq, Russia production
LONDON, England -- Oil prices remain near record levels over concerns about the stability of supplies from Iraq and fears that Russia's largest oil company may be forced to halt production.
Prices are also being bolstered by a new warning from the International Energy Agency about OPEC inability to cover any shortfall in output.
U.S. light crude was trading at $44.61 a barrel Wednesday, after touching a record $45.04 the previous day -- the highest since futures began trading on the New York Mercantile Exchange in 1983.
In London, Brent crude was trading at $41.42 a barrel, down from Monday's record high of $41.70.
Worries of supply problems in Iraq were heightened Monday after a sabotage attack on the country's main southern export pipeline.
Iraqi officials said repairs were expected to restore full capacity later on Wednesday or Thursday, Reuters reported.
Iraqi oil exports are running at about 1 million barrels a day compared to the 1.9 million before the attack.
Elsewhere, there is continuing concern about Russian supplies, with the government locked in a battle with oil giant Yukos over billions of dollars in back taxes.
Yukos has warned that it could face bankruptcy as early as this month if the state does not give it access to frozen bank accounts and sells off the Yuganskneftegaz subsidiary, its main cash earner.
Yukos officials say the dispute puts its production of 1.7 million barrels a day at risk.
On Wednesday, Russian energy officials asked that Yukos be given access to its frozen bank accounts, saying oil production and exports could be substantially cut if the embattled company is forced to halt output. (Full story)
Sergei Oganesyan, head of the Federal Energy Agency, said that a drop in production from Yukos -- Russia's largest oil producer -- could harm the country as a whole.
Also Wednesday, the IEA said global oil demand has been running even faster than previously thought over the last three years, paving the way for an oil supply crunch that has pushed prices to record highs. (Full story)
"The thin margin of spare capacity held by OPEC producers has contributed to recent price strength," said the IEA, adviser on energy to 26 industrialized nations.
Spare sustainable production capacity by the Organization of Petroleum Exporting Countries shrank to 600,000 barrels a day in July as the cartel raised output in a bid to counter high oil prices, the IEA said in its monthly Oil Market Report.
Oil prices have risen sharply since the early 2002 level of about $20 a barrel. But after adjusting for inflation, they are still well below the levels reached in the "oil shock" of the early 1980s.
According to the U.S. Department of Energy, the average price of oil in 1981 was $31.77 a barrel, or about $60 in 2004 dollars. The February 1981 peak price of $39.00 equals about $73.50 today.
