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The Guardian: Oil slides to $105 as Iraq tensions calm

Monday March 31 2008
By Fayen Wong

PERTH, March 31 (Reuters) – Oil fell more than $1 to less than $105 a barrel on Monday, extending Friday’s decline, after the restart of a crude pipeline system in Iraq eased fears of an extended exports disruption from the country’s oil-rich south.

U.S. light crude for May delivery fell $1.04 cents to $104.58 a barrel by 0053 GMT.

The decline brings total losses since Friday to nearly $3, erasing the gains made on Thursday after the attack on the pipeline feeding the Basra export terminal interrupted flows from southern Iraq for the first time since 2004.
London Brent crude fell 55 cents to $103.22.

“The restart of the crude pipeline in Iraq was the key factor in pushing oil prices down,” said Gerard Burg, a resource analyst at the National Bank of Australia in Melbourne.
“The volatility in the dollar also encouraged some sell-off in the energy markets.”

Iraqi Shi’ite cleric Moqtada al-Sadr called on his followers on Sunday to stop battling government forces after six days of fighting in Iraq’s south and in the capital Baghdad threatened to spiral out of control.

The lull in fighting in the oil-rich province of Basra allowed oil field workers to return to work, ensuring output of around 2 million barrels per day continued without disruption, a company official said on Sunday.

While the flow of Iraqi oil exports from Basra has normalised, analysts said unease about security in the Middle East as well as threats of further supply disruptions in Gabon would provide underlying support for prices in the short-term.

Turkey’s armed forces killed 15 members of the outlawed Kurdistan Workers Party (PKK) in northern Iraq on Thursday using long-range land weapons, followed up by air strikes, they said on Saturday.

It was the first time Turkish forces had killed a group of Kurdish rebels inside northern Iraq since the end of a large-scale ground incursion into the neighbouring country last month, prompting concerns about regional instability.

In Gabon, oil industry unions threatened to call a nationwide strike if they fail to reach a deal to end a strike at Shell’s subsidiary in the country, where 60,000 barrels of oil per day have already been shut down since March 20.

Analysts said a further weakening of the dollar could also help crude futures to resume their trek to record levels.

The dollar stayed vulnerable against the yen in choppy trade on Monday after signs of slowing consumption in the United States and worries about more losses at financial firms pushed Wall Street lower.

Crude oil speculators on the New York Mercantile Exchange cut their net long positions last week, according to data from the Commodity Futures Trading Commission released Friday.

Net crude long positions fell to 53,892 in the week to March 25, from 86,352 in the previous week.

OPEC governor of the United Arab Emirates said on Sunday that oil markets were well-supplied with inventories of crude oil and refined products.

The rise in oil prices, which struck a record high of $111.80 in mid-March, was a result of weakness in the U.S. dollar as well as rising cash flows from hedge funds, Ali al-Yabhouni told an energy conference in Dubai.

(Reporting by Fayen Wong; Editing by Neil Fullick)

http://www.guardian.co.uk/feedarticle?id=7424012

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