Oil prices rose to their highest levels in a month Tuesday as supply disruptions in Iraq and Nigeria added momentum to a five-day rally.
U.S. light crude settled higher by $1.26 to $39.65 a barrel in the first trade since weekend pipeline sabotage cut Iraqi oil exports almost in half. The U.S. market was closed on Monday. London Brent crude rose 88 cents to $37.18 a barrel.
U.S. oil has gained almost four dollars since last Tuesday in a rally carried along by Saudi Arabian Oil Minister Ali al-Naimi’s comments that oil prices were “fair.”
Since then other OPEC members have also said they were happy with prices at current levels, leading analysts to speculate that there may be no need for the group to carry out an agreed extra output hike for August at its next meeting, in Vienna on July 21.
Although extra OPEC oil, mostly from Saudi Arabia, has brought the market down from its early June peaks, when New York futures reached a record $42.45 per barrel, fears remain over the security of supply at a time when production capacity is stretched to meet strong demand growth.
Bulls received a brief boost on Tuesday from news that French oil major Total had shut in about 225,000 barrels per day of Nigerian production on Friday due to a workers’ protest.
Upside momentum was capped when Total said it had restarted that output on Monday.
Analysts said that with Iraq still suffering from sabotage attacks and with traders fearing supply disruptions at Russian oil giant Yukos, U.S. oil could easily top $40 again.
“We could well test the highs again,” said Edward Meir at Man Energy. “We are seeing these incidents just hitting the supply situation, and who knows, that could keep going on.”
Iraqi exports were running at 984,000 barrels per day on Monday, down from close to two million bpd before attackers bombed a pipeline running to two southern oil terminals and another linking oilfields in the north and south.
Officials said repairs on the southern pipelines could be completed late on Tuesday.
Traders also are worried that Russia’s biggest producer, Yukos, may have to cut some of its 400,000 bpd of crude and refined products exported by rail and river in July, as it struggles to fund operations with its bank accounts frozen.
YUKOS, teetering on the brink of bankruptcy with almost $7 billion in tax arrears, said on Monday it planned no export cuts this month and had prepaid pumping deals with pipeline monopoly Transneft until the end of July.
The company pumps 1.7 million barrels per day and exports more than 70 percent of output in the form of crude or oil products, representing more than one-fifth of Russia’s total production and exports.
