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Markets & Stocks
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Oil backs off, hovers near $43
Early gains evaporate as traders eye developments in Iraq.
August 27, 2004: 12:18 PM EDT

NEW YORK (CNN/Money) - Oil prices gave up early gains Friday as a morning rise fueled by fresh sabotage attacks on Iraqi oil pipelines evaporated.

U.S. light crude for October delivery fell 5 cents to $43.05 a barrel on the New York Mercantile Exchange, more than $6 below the record peak struck during last Friday's session at $49.40.

In London, Brent crude rose 7 cents to $40.40 a barrel.

Phil Flynn, a market analyst at Alaron Trading in Chicago, said oil prices are likely to see-saw before the weekend. He noted that volume is light, and traders are keeping an eye on developments in Iraq, as well as awaiting the upcoming Republication convention.

"This is a market with no clear conviction," said Flynn. "You could blow on this market and move it either way."

Oil prices have tumbled about 12 percent over the last week as speculators took profits after prices just failed to breach the $50 mark.

Earlier Friday, hopes that a peace agreement between Iraq's government and rebel cleric Moqtada al-Sadr, ending a bloody three-week uprising in the holy city of Najaf, would lead to more reliable Iraqi oil flows faltered after a renewed attack on oil facilities.

Saboteurs attacked two pipelines linking a main oil field to export storage tanks in southern Iraq on Friday, an Iraqi oil official told Reuters.

Exports were running at 1.5 million barrels a day Friday, down from 2 million barrels earlier in the week, although it was unclear whether the fall was a result of the sabotage attacks or normal tanker movements, shipping agents said.

Saboteurs Thursday attacked eight pipelines linking a southern oilfield to a pumping station near Basra, Reuters reported.

U.S. driving season nears end

Turmoil in Iraq has underpinned oil price strength in recent months, adding to worries over a lack of spare production capacity from other OPEC nations and flourishing demand growth in China and India.

A U.S. government report Wednesday showing hefty gasoline inventories at the tail-end of the summer vacation season in the world's largest energy consuming nation also knocked energy prices lower.

While analysts say the market has been due for a correction for some time, they also say fundamental support is not far below the market, with global demand growth running at the fastest rate in 24 years.

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A leading oil shipping analyst added on Thursday that crude oil shipments from OPEC were expected to have declined 380,000 bpd in August, countering expectations they would increase.

"The projections are probably not far from the truth in terms of production and exports and are mostly down to interruptions in Iraqi oil supplies," said Roy Mason of consultancy Oil Movements.

"If it's confirmed by other agencies like the IEA (International Energy Agency) and other analysts then it runs counter to what we actually thought was going on in August, namely that exports were climbing," he said.

OPEC has signaled that it plans to increase production to combat high oil prices, saying output would reach 30.5 million bpd in September from 29.6 million bpd in July.

OPEC will meet on Sept. 15 in Vienna to discuss a possible further increase in production quotas.  Top of page


-- from staff and wire reports




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