Oil prices eased from new record highs on Monday as victory for Venezuelan President Hugo Chavez in a referendum on his rule eased fears that unrest could upset the country’s oil exports.
Further disruption to Iraq’s oil exports and warnings that YUKOS’ financial crisis could ultimately cut into oil shipments supported prices, which have set new records in all but one of the last 12 trading sessions.
U.S light crude oil for September was down 53 cents at $46.05 a barrel, off an early peak of $46.91 a barrel, a new high in the 21-year history for the New York Mercantile Exchange contract. London Brent was down 28 cents at $43.60 a barrel, after hitting a new record at $44.11.
The modest declines came after Venezuelan President Hugo Chavez survived a weekend recall referendum, which eased the threat of disruption to the country’s crude exports.
National Electoral Council President Francisco Carrasquero said in a national broadcast that the “No” option opposing Chavez’s recall had obtained just over 58 percent of the vote, while the “Yes” vote obtained nearly 42 percent.
Two pro-opposition electoral officials questioned the result, saying that procedural checks had not been carried out on the results as required.
Energy markets have been worried about disruptions to the country’s 2.6 million barrels per day (bpd) oil production if a disputed result sparked social unrest. Shipping sources had said shipments from Venezuela, the world’s fifth-largest crude exporter, were running smoothly.
YUKOS, Iraq woes, OPEC helpless
Prices were bolstered as Shi’ite militia fighting U.S. forces set fire to an oil well in southern Iraq, a new tactic as part of a Shi’ite campaign to target oil infrastructure.
Iraq’s oil exports already had been halved to around 900,000 bpd since saboteurs blew up a pipeline a week ago and a U.S. offensive against the followers of anti-U.S. cleric Moqtada al-Sadr spread to several Iraqi cities.
And concern lingered that supplies from Russia’s biggest producer YUKOS will suffer as the authorities pursue payment of multi-billion dollar tax arrears.
YUKOS chairman Viktor Gerashchenko told Reuters that the company would be allowed to produce and sell oil until the end of September and would try to avoid bankruptcy for as long as possible.
Volgotanker, the company which ships YUKOS’ oil by river, said on Monday it was not prepared to ship crude on credit, although transport fees have been paid until the end of August.
Oil is up more than $10 a barrel since the start of the year. In real terms, adjusted for inflation, prices are still well below 1980’s peak of $80, following the Iranian revolution. But average prices for the year to date are near matching those of 1974, the first oil shock, when crude averaged an inflation-adjusted $43 during the Arab oil embargo.
While leading economies so far have managed to cope with higher prices, signs are emerging that rising energy costs are starting to hurt. Germany’s Bundesbank said its economy may not be able to sustain the moderate growth rates of the first and second quarters in coming months and that further oil price rises would pose a “serious risk.”
Iran said on Saturday that the OPEC cartel, which accounts for around half world oil exports, could do nothing to douse prices as crude supply was already running well above demand.
The Organisation of the Petroleum Exporting Countries, due to meet next on September 15, is already pumping at a 25-year high of 30 million bpd, casting aside the restraint of official quotas.
“It seems that prices will continue to go up without taking into consideration the basic elements of the market, supply and demand,” said Iran’s OPEC governor Hossein Kazempour Ardebili.
Saudi Arabia, the world’s top oil exporter, is producing around 9.5 million bpd, against a quota of 8.45 million bpd, and is expected to reach near 10 million bpd in September.
Saudi Crown Prince Abdullah, the kingdom’s de facto ruler, said in remarks published on Monday Riyadh would pump “as much as fields allow” to cool scorching oil prices that he prefers to see between $25-$30 a barrel.