Oil Price Up as Iraq Output Targets Slip

Reuters
www.reuters.com
May 19, 2003

LONDON (Reuters) - Oil prices rose Monday as looting and insecurity at Iraqi oilfields put back the day Baghdad can resume oil exports.

U.S. officials had originally hoped to restore two-thirds of oil output from what was the world's seventh largest exporter by mid-June after the war. But an Oil Ministry official said this had been pushed back by more than a month and could slip further if the security situation did not improve.

Benchmark Brent crude oil gained 25 cents to $26.35 a barrel, extending a $1 rally from the previous week. U.S. crude futures rose 10 cents to $29.24.

Christopher Bellew, a broker a Prudential Bache International, said big investment funds had sold oil futures short expecting prices to fall further and were now buying back those positions.

``Funds that had expected prices to come off on Iraq are now covering their short positions,'' he said.

A senior Iraqi oil ministry official told Reuters Monday that Baghdad now was aiming to pump 1.3 million barrels per day of crude oil by mid-July, versus a pre-war level of 2.5 million.

This latest target could be delayed further if security did not improve, he said.

``The pillage and looting at the oil installations this time was much more devastating than in 1991,'' the official said, in reference to damage sustained during the Gulf War.

``In some areas it's getting worse rather than better. What we anticipate on production may not be attainable if the security situation makes repairs impossible.''

The country now is pumping only 310,000 barrels daily. It needs 550,000 barrels to meet domestic energy needs before it can export oil and help finance reconstruction.

The official, who asked not to be named, said the lack of security meant there was a risk of more looting, even to newly repaired facilities.

``We have no communications and no access to some of the fields and pipelines,'' the official said.