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Money News

Oil tops $107 on Iraq pipeline explosion

LONDON (Reuters) - Oil jumped above $107 on Thursday after saboteurs blew up one of Iraq’s two main export pipelines.

Oil facilities are seen on Lake Maracaibo in Venezuela's western state of Zulia March 1, 2008. Oil jumped above $107 on Thursday after saboteurs blew up one of Iraq's two main export pipelines. REUTERS/Jorge Silva

The attack on the pipeline in southern Iraq came on the third day of an Iraqi military operation against fighters loyal to Shi’ite cleric Moqtada al-Sadr in the oil port of Basra.

“This morning saboteurs blew up the pipeline transporting crude from Zubair 1 by placing bombs beneath it. The pipeline was severely damaged,” a Southern Oil Company official told Reuters.

“We will lose about a third of crude exported through Basra,” he said, adding that it would take three days to repair the pipeline if the fire was brought under control.

Iraq exported 1.54 million barrels per day from Basra in February.

U.S. light crude for May delivery rose as high as $107.70 a barrel and it was up $1.30 at $107.20 a barrel by 0958 GMT.

London Brent crude rose $1.19 to $105.18.

“We see events in Iraq as having taken a dangerous turn, with the stability of the southern oil system now starting to become a potential concern,” Barclays Capital Research said in a research note.

Iraq has only recently seen its oil exports return to pre-invasion levels.

Explosions could be heard every 10 or 15 minutes in Basra, epicentre of an Iraqi government crackdown on the followers of Sadr.

Authorities imposed curfews across southern Iraq in an effort to halt the spread of violence after the largest military offensive carried out by Iraqi forces without major backing from U.S. or British combat units.

On Wednesday, U.S. crude prices had registered their biggest one day percentage gains after U.S. government data showed a larger than expected falls in fuel stocks.

Crude oil inventories were unchanged last week, against expectations for an increase of 1.7 million barrels.

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