Oil steady with eye on Iraq, U.S. refineries

Oil steady with eye on Iraq, U.S. refineries

SINGAPORE (Reuters): Oil market were steady on Friday, consolidating recent gains on concerns over Iraq's oil exports halt and a U.S. warning of potential California refinery outages due to power woes.

At 0705 GMT (2.05 p.m. Jakarta time), benchmark U.S. light sweet crude oil futures were last traded at $29.04 a barrel, levels unchanged from Thursday's settlement, when the market gained 20 cents.

Oil has been in a holding pattern near $29 a barrel since making strong gains on Monday.

The latest move upwards on Thursday came after the U.S. Department of Energy (DOE) said in a report that nearly a quarter of California's gasoline refinery production was at risk of shutting down for up to two weeks if they lose power from expected rolling blackouts.

The report said that some refineries were at risk because they have no back-up generators to produce electricity.

It would take seven to 14 days to return most of the refineries' operating units to full production if they lost power, the DOE said.

This countered some mid-week relief from inventory data which showed rising U.S. gasoline stocks and led some in the market to prematurely banish worries of a summer supply crunch.

Iraq's halt of oil exports in protest over proposed changes to its oil-for-food program with the United Nations also remains a key market concern.

Russia said on Thursday it would not rush into a decision to revamp the Iraqi sanctions, as demanded by the United States and Britain, thereby raising doubts U.N. Security Council could meet its July 3 deadline for a deal.

Baghdad, unhappy over the sanctions revamp issue, has stopped exports since June 4 after the U.N. extended the oil-for-food for only one month instead of the usual six.

Baghdad rejected on Tuesday the latest Anglo-American proposal to modify its resolution on sanctions, meant to ease restrictions on civilian goods imports while cracking down on military goods and oil smuggling.

A top U.S. energy official on Thursday warned of low U.S fuel supplies this winter unless Iraq's production is quickly offset by other producers.

"The recent OPEC meeting and Iraqi cutoff of their oil-for- food exports could result in oil production levels low enough to cause us to enter the fourth quarter with low crude oil and heating oil inventories," said John Cook, director of the Petroleum Division at the DOE's Energy Information Administration, at a congressional hearing.

OPEC however has played it cool.

The cartel, which controls the bulk of world traded supplies, adopted a wait-and-see stance at its output meeting in Vienna on June 5.

But Qatar's Oil Minister Abdullah bin Hamad al-Attiyah told Reuters on Thursday that the OPEC will respond to any loss from Iraq halting its 2.1 million barrel-per-day crude oil exports, to ensure global supplies are adequate.

"If we see that in July that the market needs more oil, we'll do it for sure," Attiyah said.

Attiyah said U.S. Energy Secretary Spencer Abraham had asked that OPEC raise its production level.

Qatar is the smallest producer within the OPEC grouping.