Oil above $45 on Iraq, Venezuela

Oil above $45 on Iraq, Venezuela

Reuters, London

Oil hovered near record peaks on Friday, underpinned by worries of fresh sabotage on Iraq's oil industry and possible unrest in Venezuela where President Hugo Chavez this weekend faces a referendum on his rule.

U.S. light crude eased 8 U.S. cents to $45.42 a barrel after Thursday's new record high of $45.75 on the New York Mercantile Exchange.

Prices took a break from a series of new records over the past two weeks as Iraqi oil exports flowed normally from southern fields to offshore terminals after pumping resumed through a main pipeline sabotaged earlier this week, an official from Iraq's South Oil Company said.

Oil exports had been cut by almost half to just below one million barrels per day (bpd) following the sabotage strike.

Traders worry that Iraqi rebels loyal to Shi'ite Muslim cleric Moqtada al-Sadr will carry through a threat to attack oil infrastructure after U.S. forces stormed the holy city Najaf to quell a week-long uprising by Sadr supporters.

There were also concerns that Sunday's referendum in Venezuela may lead to violence if Chavez is defeated, and put the country's oil shipments at risk.

"Anything less than a clear answer will likely perpetuate the country's political turmoil," consultants PFC Energy said in a report.

Energy Minister Rafael Ramirez gave reassurances on Thursday that Caracas would guarantee supplies to the world market whatever the outcome of the vote.

Ramirez said Venezuela hopes OPEC will decide to increase its price band from its levels of $22 to $28 per barrel on Sept. 15 in Vienna, Austria.

Venezuela has asked other OPEC members to consider raising the band. The 11-member cartel is studying the proposal. The government will ensure oil production is not disrupted in the days leading up to an Aug. 15 recall vote against President Hugo Chavez.

To win the recall referendum, Venezuela's opposition must get more than the almost 3.8 million votes Chavez won when he was re- elected to a six-year term in 2000 after pushing though a new constitution.

If Chavez loses, Vice President Jose Vicente Rangel would head a transitional government until fresh presidential elections are held within 30 days.

Chavez's government claims oil-rich Venezuela is producing about 3.1 million bpd, but analysts say output is lower - about 2.5 million bpd.

Uncertainty also remains over oil exports from Russia's YUKOS, which continues to battle bankruptcy but has so far avoided any disruption to its 1.7 million bpd of production.

Fears that tightly stretched supplies have left little leeway for any disruptions have added 23 percent, or more than $8.60, to a barrel of crude oil since the end of June.

U.S. production in the Gulf of Mexico was cut back this week due to a tropical storm, while government data showed a hefty and unexpected drop in national crude inventories.

Demand also remains strong. Latest data from China on Friday showed crude import growth into the world's second biggest consumer holding strong in July at 40 percent. China's crude imports have averaged 2.49 million bpd in the first seven months of 2004, also up 40 percent compared to the same period last year.

China's demand for oil so far appears little dented by Beijing's efforts to rein in its strongly growing economy or by high prices.