LONDON – Oil prices held below the $47 mark on Monday as Iraq resumed exports from both its northern and southern outlets after lengthy disruption, despite fierce fighting in the holy city of Najaf.
U.S. light crude for October, the new benchmark, fell 67 cents to end at $46.05 a barrel on the New York Mercantile Exchange (search). The expiring September contract lost 84 cents on Friday as traders took profits from a record run that took prices within 60 cents of the $50 mark.
Brent crude (search) in London was down 34 cents at $43.20 a barrel. Before Monday, U.S. prices set record peaks in all but one of the previous 16 sessions.
Iraq restarted a pipeline from its northern fields after a three-month halt and resumed full exports through its southern terminals for the first time in two weeks.
Iraq resumed pumping crude oil along its northern Kirkuk pipeline (search) to the Turkish Mediterranean port of Ceyhan at around 450,000 bpd, just over half normal capacity, a shipping source said on Monday. Iraq last sold oil pumped through from Kirkuk in late May.
Authorities also reopened the main export pipeline in southern Iraq on Monday after deploying U.S.-backed Iraqi National Guardsmen to protect oil facilities in the region.
Flows from southern Gulf terminals were restored to normal levels of around two million bpd after exports had been running at around half normal levels since August 9 following a sabotage attack.
U.S. troops and Shi'ite rebels fought fierce battles in the holy Iraqi city of Najaf on Monday, with multiple explosions and gunfire echoing around a sacred shrine held by followers of radical cleric of Moqtada al-Sadr.
A commander in Sadr's Mehdi Army militia had threatened to attack oil facilities in the south in response to a U.S. offensive aimed at putting down the uprising.
Reduced flows from Iraq and concern that the financial turmoil at Russia's top producer Yukos (search) could ultimately disrupt supplies have helped drive up oil prices $10 since the end of June. Rapid demand growth has left world oil supplies with little spare capacity to make up for disruption.
Yukos on Monday cut its oil output forecast for this year by 4.5 percent and said it would slash capital expenditure by more than a third due to its tax dispute with the state.
"Despite numerous requests to allow legal access to our bank accounts in order for Yukos to continue normal operations, collection orders remain in place and no cash is available to the company from those accounts," the statement quoted Yukos chief executive Steven Theede as saying.
Russian authorities were also reported to be considering launching a fresh $3 billion tax demand against Yukos' main subsidiary, Yuganskneftegaz, in addition to a $3.4 billion claim against Yukos itself for 2000 and another $3.4 billion for 2001.
So far efforts to pursue the arrears have had no impact on supplies from Yukos, which produces around 1.7 million bpd, or 20 percent of Russia's production.
There is little sign that oil's rally is slowing the fuel demand that is fed by global economic growth. OPEC producers are pumping at the highest level in a quarter of a century to take advantage of high prices.
Iran's deputy oil minister said OPEC could do no more to control the price rise.
"There is no extra capacity. Those that consume oil, they should decrease demand, that is the only solution. I think prices will remain around $50 a barrel," said Mohammad Hadi Nejad Hosseinian. OPEC ministers meet on September 15.
International Monetary Fund (search) Director Rodrigo Rato said on Friday that he still expected world economic growth this year of 4.6 percent. Global oil demand growth this year is running at a 24-year high of nearly 3 percent.