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crude oil jumps to one-month high

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    Crude Oil Jumps to One-Month High as Iraqi Exports Fall by Half

    July 6 (Bloomberg) -- Crude oil futures rose to a one-month high in London as a damaged pipeline in Iraq, the Middle East's fifth-largest oil producer, cut exports by half for a fourth day.

    OAO Yukos Oil Co., Russia's top oil exporter, warned it may need to cut output after the government froze its bank accounts in a tax dispute. A possible drop in shipments heightened concern refiners will run short of crude as they prepare to meet winter demand in the Northern Hemisphere.

    ``There is a lot of supply, but demand is so high that any disruptions to supplies are driving prices higher,'' said Shelley Mansfield, the energy manager at ADM Investor Services International in London. ``Realistically, there are likely to be more disruptions.''

    Brent crude for August settlement rose 55 cents, or 1.5 percent, to $36.85 a barrel on London's International Petroleum Exchange at 12:30 p.m. local time, its highest since June 3. On the New York Mercantile Exchange, crude oil for August delivery also reached a one-month high of $39.41 a barrel in after-hours trading, up 2.7 percent from Friday. The exchange was closed for the Independence Day holiday yesterday.

    The restoration of sovereignty to an Iraqi interim government by the U.S.-led coalition on June 28 raised expectations attacks on the country's oil infrastructure would subside. The sabotage of pipelines June 14 and 15 halted exports from Iraq's Persian Gulf terminals.

    Ruptured Pipeline

    After the latest pipeline rupture Saturday, Iraq's Persian Gulf terminals cut loadings to 44,000 barrels an hour from 80,000 barrels an hour, shipping agents said.

    ``I don't think the market should react so much to supply interruptions from Iraq because it will be an ongoing theme,'' said Craig Pennington, the head energy analyst at Schroders Plc in London. ``The genuine concern is the lack of spare capacity within'' the Organization of Petroleum Exporting Countries.

    Except for Saudi Arabia, which the International Energy Agency says can temporarily pump more than 10 million barrels a day, OPEC has little margin to compensate for an unexpected drop in world supplies. The Saudi kingdom says it's been producing 9.1 million barrels a day since last month.

    Iraq's South Oil Co. hasn't discovered the cause of the rupture and can't say when repairs will be completed, Director- General Jabbar al-Leaby said in a telephone interview yesterday from Ammam, Jordan. He couldn't be reached today.

    Russian Deadline

    In Moscow, Yukos faces a deadline this week to pay 99.4 billion rubles ($3.4 billion) in taxes and fines dating from 2000, and the Tax Ministry said it sent to the company a 98 billion ruble tax bill for 2001.

    ``This sort of instability in Russia, the world's second- largest supplier of energy, is very worrying,'' ADM's Mansfield said. Yukos planned to pump 1.8 million barrels a day this year, about equal to Iraqi exports from the Persian Gulf.

    ``We are not planning to cut any of our exports and are going to respect all our oil export commitments,'' Yukos spokeswoman Claire Davidson said in London yesterday. Yukos will meet ``all July obligations,'' she said.

    Russian President Vladimir Putin said June 17 he opposed bankruptcy for Yukos. He hasn't said since how it can be avoided.

    ``Putin made it clear that he does not want Yukos to be bankrupted,'' said Tom James, associate director of commodity derivatives at Tokyo-Mitsubishi International in London. ``It would be like killing the golden goose.''

    New York crude oil prices have dropped 7.5 percent since reaching a record intraday high of $42.45 a barrel June 2. OPEC, which produces more than a third of the world's oil, raised its output quota by 2 million barrels to 25.5 million barrels a day this month to cut prices. The group agreed to raise its self- imposed limit on output another 500,000 barrels a day next month.

    ``OPEC output is going to come in and filter into inventories, putting prices under moderate pressure,'' Schroders' Pennington said. He expects the price of the closest-to- settlement Brent contract to fall to $30 a barrel by the end of the third quarter.
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