Iraq attacks find market immune oil prices

25 June 2004
Oil prices remained surprisingly steady in mid-June in the wake of a spate of attacks on the Iraqi oil industry that left exports crippled. The continued violence was offset for traders by anticipation of increased supplies from OPEC, a build-up in US crude stocks and an end to the threat of renewed disruption from Nigeria. Spot Brent was trading at $34.66 on 16 June, compared with $34.81 a week earlier.

Bomb attacks on 14-15 June on a pipeline supplying the Basra and Khor al-Amaya export terminals slashed sales from the southern fields, which produce about 1.7 million barrels a day (b/d) for export, by about two-thirds. Repairs are likely to take about 10 days. Exports from the northern Kirkuk-Ceyhan pipeline have been running at a trickle since the end of the war thanks to repeated sabotage and accidents, and 15 June saw another attack.

While the wave of attacks on Iraq's infrastructure sucked much-needed oil from the market, traders have become accustomed to unrest in the Iraq, so such incidents have less impact than, for example, the recent violence against foreign oil workers in Saudi Arabia. And the rise in tension coincided with the end of a general strike in Nigeria on 11 June, removing a potential supply disruption.

However, news on fundamentals in mid-June was unambiguously bullish. The International Energy Agency released its latest monthly report, upping the 2004 demand growth forecast yet again by 360,000 b/d to 2.3 million b/d. On this occasion, Brazil and India joined the usual suspect, China, in being responsible for higher levels of demand. And the latest data from the US, released on 16 June, followed a familiar pattern. Crude inventories built by 0.3 per cent to 302.9 million barrels, but gasoline stocks fell marginally to 205.9 million barrels, in advance of the US driving season.

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