World oil prices pushed to their highest levels in 10 days on Friday after export outages in Iraq and Norway spurred hedge funds to plough money back into the market, traders said.
U.S. light crude traded up 24 cents to $38.70 a barrel by London morning time, adding to Thursday’s $1.14 surge driven by a wave of speculative fund buying, brokers said.
London’s Brent crude rose 30 cents to $36.51 a barrel, also the highest since June 8.
Prices fell by more than 10 percent from record highs two weeks ago as speculative players cashed out of oil due to swelling U.S. inventories and OPEC’s pledge to pump extra crude this summer.
But simmering fears over Middle East oil security amid increasing violence in Iraq and Saudi Arabia were revived this week by a trio of pipeline sabotage attacks that brought Iraq’s 1.6-1.8 million barrels per day of exports to a halt.
Oil officials in the country said they hoped to resume limited supplies of around 700,000 barrels per day quickly, but repairs continued on Friday, sources said.
It was the second attack in as many months on the country’s southern pipeline network, previously seen as well insulated from sabotage. The northern Kirkuk pipeline has been beset by bombings since the war ended last year, managing only limited, sporadic exports.
Adding additional stress to an already taut global supply chain, 200 Norwegian oil workers went on strike over pay Friday, forcing oil companies there to begin shutting in nearly 400,000 barrels per day — or 13 percent — of output from the world’s third-biggest exporter.
“With the Iraqi pipelines out and this Norwegian strike, we haven’t got much of a cushion in the market right now,” said a broker from the floor of London’s IPE exchange. “How many more barrels can OPEC make up?”
Traders also fear a potential attack on oil facilities in Saudi Arabia, the world’s top exporter, which has seen a wave of militant violence this year aimed at ousting the ruling royal family and driving out Westerners.
Saudi Arabia has pledged to supply more than nine million bpd to the world’s 81 million barrels per day market in June to ease worries of tight supplies at a time when robust global economic growth in 2004 has fuelled the biggest increase in oil demand in 24 years.
That output surges leaves the kingdom with about 1.5 million barrels per day of unused production capacity — which analysts say is the world’s only spare supply cushion to compensate any other unexpected outages.
The latest gains were also fuelled by an unplanned shutdown at a gasoline-producing unit at ExxonMobil Corp’s 538,000 barrel-per-day refinery in Baytown, Texas, which raised fears of a summer supply crunch during peak holiday season.
U.S. gasoline prices plunged by more than 20 percent from record highs in late May after traders reckoned rising inventories, although still marginally below last year’s levels, would be sufficient to last through the peak demand summer driving season.
But prices spiked on Thursday and continued climbing Friday after the outage, with futures up 1.3 percent at $120.25 a gallon, climbing five cents in the last two days.
According to a filing with the Texas Commission on Environmental Quality, ExxonMobil’s unit will be closed for at least two days, although traders in the Gulf Coast gasoline market said it would more likely be shut for 10 days.