Oil prices rose Monday after attacks on Iraqi oil lines forced the country to reduce its exports by half. News of Russian giant Yukos Oil Co.'s expanding legal and financial troubles added to traders' anxiety.
Iraqi repair crews worked to fix one of two key southern crude oil pipelines, officials in the state-run South Oil Co. said. The disruption, about two weeks after exports were halted because of attacks on the two export lines, heightened concern among traders and analysts about the security of Iraq's oil flow.
The shutdown cut exports of crude oil from Basra to about 960,000 barrels a day, roughly half the postwar levels there.
"This is extremely disruptive," said Conrad Gerber, president of PetroLogistics Ltd., a Geneva-based firm that tracks tankers. As a result of the attacks and the disruption in supplies, "the market has subtracted Iraqi oil out of the equation . . . simply because of volatility in supply."
In London, contracts of North Sea Brent crude for August delivery were trading at $36.30 per barrel, up 38 cents on the International Petroleum Exchange, before closing at $35.92. U.S. markets were closed for the Independence Day holiday.
The current Iraqi disruption began Saturday when the line was breached, reportedly by smugglers, an oil company official said on condition of anonymity. On Sunday, saboteurs blasted another strategic line running from the north to the south, but South Oil officials said that line had not been used extensively for years, so exports would not be affected.
South Oil officials predictedthat repairs would be completed later this week. Repeated efforts to reach officials in the Oil Ministry were unsuccessful, and the State Oil Marketing Organization, which is responsible for crude contracts, declined to comment on the export situation.
Also Monday, Russia's Yukos came a step closer to bankruptcy after a group of Western banks signaled they might call in a $1 billion loan to the company. Societe Generale of France, the lead arranger for the lenders' syndicate, said the banks don't want to "jeopardize" the company, but the notice issued Monday means the banks can call in their debt at any time.
Yukos has been ordered to pay a 99.4-billion-ruble ($3.4 billion) back-taxes bill by Thursday. Its bank accounts were ordered frozen last week, and a freeze on its assets remains in place, giving the company no way to raise money.
With a daily output of about 1.72 million barrels, or nearly one in every five that Russia extracts, Yukos is the country's largest oil producer.