High oil prices eased today as Iraq resumed limited crude shipments from its southern oil terminals to end a six-day halt caused by sabotage.
US light crude for July delivery fell 39 cents to $38.36 a barrel, around four dollars off 21-year highs reached in early June. London's Brent crude fell 21 cents to $36.00 a barrel.
Prices fell after Iraq resumed oil exports from its two southern oil terminals at a rate of one million barrels per day (bpd), just over half normal levels, after repairing a sabotaged pipeline.
Last week's attacks were the second major assault in as many months on the country's southern pipeline network. Iraq's northern Kirkuk pipeline has been beset by bombings since the war ended last year, managing only sporadic exports.
Fears of further attack against oil facilities in the run-up to the June 30th handover of power to the Iraqis have stemmed a slide that pulled oil prices down 10 per cent from record highs hit early this month.
Swelling US crude inventories and extra supply from the OPEC producer cartel spurred selling from the big-money speculative funds that helped drive oil prices to record peaks.
But as robust economic growth spurs the fastest oil demand growth in 24 years there is little spare capacity in oil-producing nations to counter unexpected supply disruptions.
Adding to international supply woes, a section of pipeline taking crude oil from Azerbaijan across Russia for export through the Black Sea was shut on Sunday after an explosion.
Saudi Arabia plans to keep pumping about 9.1 million bpd to the 81 million bpd world market during July, the same level as this month, to ease supply worries, an oil industry source inside the kingdom said today.
The output surge leaves Saudi Arabia with about 1.5 million bpd of unused production capacity which analysts say is the world's only spare supply cushion to compensate any other unexpected outages.