LONDON – World oil prices eased from fresh record highs on Tuesday after Iraq resumed exports following a sabotage attack on the main export pipeline from its southern oilfields.
U.S. light crude (search) touched $45.04 a barrel, a record in the 21-year history of crude futures trade on the New York Mercantile Exchange (search), before the news of restored Iraqi supplies sent prices down 44 cents on the day to $44.40 a barrel.
London Brent crude (search) was down 22 cents at $41.34 a barrel.
On Monday, saboteurs loyal to radical cleric Moqtada al-Sadr blew up the main 48-inch pipeline that runs from Iraq's southern oilfields to its offshore Basra and Khor al-Amaya terminals in the Gulf. Swift repairs saw normal production restored late on Tuesday, an Iraqi oil official said.
With world oil producers pumping close to full capacity, fears are that another outage in Iraq or elsewhere could send prices up to $50 a barrel.
"The prospect of a cessation of Iraqi exports from the country's southern ports for a prolonged period would almost certainly be enough to push oil prices above $50 a barrel since there is not enough spare capacity to cover the 1.7-1.9m bpd of oil exported from Basra," analysts at Barclays Capital said.
Oil prices have climbed more than 30 percent so far this year for fear that supply may not cope with the fastest demand growth in more than two decades. Demand has remained buoyant in China and the United States, despite high prices.
"The world has one of the smallest cushions ever for absorbing a loss of supply while demand growth is the strongest in a generation," said Daniel Yergin, chairman of U.S. consultancy Cambridge Energy Research Associates. "These conditions mean the world oil market is even tighter than in 1973 oil crisis."
In real terms, stripping out inflation, oil prices remain much lower than the highs of 1979 during the Iranian revolution when crude averaged $80 a barrel in today's money.
Another source of anxiety is Russia's largest oil company Yukos (search), battling bankruptcy. Russian bailiffs on Monday seized the main Yukos production unit Yuganskneftegaz for the second time, a move interpreted as a sign of the state's resolve to dismantle the oil company.
Justice Ministry officials, collecting a $3.4-billion-tax debt for 2000, said late on Monday they had frozen shares in the oil-producing subsidiary despite a court decision on Friday ruling that an earlier seizure of the unit was illegal.
In the United States, small volumes of production were closed in the U.S. Gulf as a precaution against damage from approaching Tropical Storm Bonnie.