Oil falls for second session

August 23, 2004

LONDON (Reuters) - Oil prices fell for a second session Monday as Iraq resumed exports from both its northern and southern outlets after lengthy disruption, despite fierce fighting in the holy city of Najaf.

Russian President Vladimir Putin's remarks to President Bush about Russian companies raising production and exports also helped drive prices lower.

Light crude for October delivery fell 67 cents to close at $46.05 a barrel on the New York Mercantile Exchange. The expiring September contract lost 84 cents Friday as traders took profits from a record-breaking run that took prices within 60 cents of the $50 mark.

Brent crude in London finished down 51 cents at $43.03 a barrel. Before Monday, U.S. prices set record peaks in all but one of the previous 16 sessions.

Prices slipped as Iraq restarted a pipeline from its northern fields after a three-month halt and resumed full exports through its southern terminals for the first time in two weeks.

Iraq resumed pumping crude oil along its northern Kirkuk pipeline to the Turkish Mediterranean port of Ceyhan at around 450,000 bpd, just over half normal capacity, a shipping source said on Monday. Iraq last sold oil pumped through from Kirkuk in late May.

Authorities also reopened the main export pipeline in southern Iraq on Monday after deploying U.S.-backed Iraqi National Guardsmen to protect oil facilities in the region.

Yukos warning
Reduced flows from Iraq and concern that the financial turmoil at Russia's top producer Yukos could ultimately disrupt supplies have helped drive up oil prices $10 since the end of June. Rapid demand growth has left world oil supplies with little spare capacity to make up for disruption.

Yukos on Monday cut its oil output forecast for this year by 4.5 percent and said it would slash capital expenditure by more than a third due to its tax dispute with the state.

"Despite numerous requests to allow legal access to our bank accounts in order for Yukos to continue normal operations, collection orders remain in place and no cash is available to the company from those accounts," the statement quoted Yukos chief executive Steven Theede as saying.

President Putin told President Bush at the president's Texas ranch Monday that Russian oil companies were boosting production as well as exports and would continue to do so.

Putin and Bush also discussed the importance of keeping Iran from developing nuclear weapons, and they talked about the conflicts in Iraq and Afghanistan, McClellan said.

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