OIL ROUND-UP: Markets cautious on regional news

Oil prices eased in the global markets for the second consecutive week. Spot Brent crude ended at $71.03 a barrel on 23 August, compared with $72.35 a barrel a week earlier.

The main reason for the decrease was a calming in the geopolitical situation in the Middle East. On 22 August, Iran handed over its long-awaited written response to the package deal offered by the five permanent members of the UN Security Council plus Germany on its proposed plans to develop nuclear capabilities. In his reply to western representatives in Tehran, Iranian chief nuclear negotiator Ali Larijani did not reveal the details of the reply, saying that the republic was prepared to hold 'serious talks' on the issue of suspending uranium enrichment.

'Iran has delivered its response in a way that is likely to create splits between the permanent Security Council members,' said Barclays Capital in its latest weekly report. 'We expect some members will push for more talks, while others will argue that the suspension of enrichment should be the single benchmark for judging the Iranian response.'

In Lebanon, however, international efforts to assemble a 15,000-strong peacekeeping force to operate in the south continued to falter. Following the disappointing commitment of a mere 200 troops by France, Italy announced its willingness to lead the UN force and pledged up to 3,000 of its own troops. But, their deployment is contingent on Israel committing fully to the ceasefire. 'We expect a renewed effort from Israel this time and to respect the ceasefire,' said Italian Foreign Minister Massimo dAlema. 'It is fair to expect that Hizbollah put down their weapons, but we cannot send out troops to Lebanon if the [Israeli] army keeps shooting.'

Some good news influenced the market. Upstream operator BP said on 22 August that it had restored 50 per cent of production from Prudhoe Bay, nearly two weeks after threatening to shut the entire Alaskan field down because of leaks from corroded pipelines. The discovery of leaks and corroded pipes prompted the company to begin shutting down the 400,000-barrel-a-day (b/d) US field in early August.

In Nigeria, field operator ExxonMobil said its 500,000-

b/d offshore concession remained unaffected by militant attacks. 'We currently have no production shut in in Nigeria,' said chief executive Rex Tillerson.

'In the US, the weekly oil data is soft with inventories rising relative to seasonal norms. On the positive side, gasoline demand has stayed above 9.5 million b/d for the ninth straight week, and is expected to strengthen year on year, given the recent fall in prices,' the Barclays report said.