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The New York Times: Oil Steady Above $73 on Mideast

EXTRACT: In Nigeria, the world’s eighth-biggest exporter, there was no apparent progress toward restoring the more than one-quarter of production shut in by militants, with attackers who closed an Agip pumping station last Tuesday still in talks. Royal Dutch Shell (RDSa.L) said it did not expect a significant recovery in output before the end of the year.

THE ARTICLE 

By REUTERS
Published: July 31, 2006
Filed at 1:59 a.m. ET

SINGAPORE (Reuters) – Oil held steady above $73 a barrel on Monday, with traders torn between hope for a Middle East truce and fear of escalation after the bloodiest attack in the nearly three-week war between Israel and Hizbollah.

U.S. light, sweet crude for September deliveryslipped 6 cents to $73.18 a barrel by 0531 GMT after sliding $1.30 on Friday, partly hit by data showing that U.S. economic growth had slowed to a 2.5 percent annualized rate in the second quarter.

London ICE Brent (LCOc1) crude rose 4 cents to $73.43.

Friday’s profit-taking retreat was largely pinned on brighter prospects for a ceasefire in the Middle East that would end a 19-day war traders fear might draw in neighboring oil producers like Syria or Iran, both supporters of the Hizbollah guerrillas.

But on Sunday an Israeli air strike on the southern village of Qana killed at least 54 Lebanese civilians, including 37 children, both intensifying pressure for an immediate halt to the fighting and fuelling more anger across the Arab world.

The attack forced U.S. Secretary of State Condoleezza Rice to abort a planned trip to Beirut for mediation talks.

“The Israel-Lebanon conflict seems to have escalated again over the weekend. While there’s been no direct impact on oil supply, the conflict seemed ring-fenced by last Friday, but after the weekend’s tragic events that seems less certain,” said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia.

Israel has suspended its aerial bombardment of southern Lebanon for 48 hours to allow for an investigation into the attack and will co-ordinate with the United Nations to allow a 24-hour window for residents to leave the area if they wish.

It said that air strikes that hit roads near the border with Syria, reported by Lebanese security sources, had occurred before the start of the two-day suspension.

World leaders condemned the attack on Lebanon, but the United States and Britain again refrained from joining calls for an immediate ceasefire, highlighting the divisions in the international community.

However, hopes for an end to fighting brightened again after Rice said on Monday she believed a ceasefire could be forged this week. Rice told reporters in Jerusalem she would call for a U.N. resolution this week on the ceasefire and the formation of an international stabilization force for Lebanon.

In Nigeria, the world’s eighth-biggest exporter, there was no apparent progress toward restoring the more than one-quarter of production shut in by militants, with attackers who closed an Agip pumping station last Tuesday still in talks.

Royal Dutch Shell (RDSa.L) said it did not expect a significant recovery in output before the end of the year.

Offsetting the supply outages, the U.S. economy in the second quarter grew at less than half the 5.6 percent rate registered in the first quarter, raising concerns about a possible slowing in oil demand from the world’s biggest consumer.

And Iraq will resume exports through its oil pipeline to Turkey at 600,000-700,000 barrels per day (bpd), Oil Minister Hussain al-Shahristani said at the weekend. A senior ministry source said the flow, shut off since a new bout of sabotage on July 9, should start in a few days.

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