The price of crude rose above $32 a barrel on Friday morning, as the market digested news that Iraq had halted oil shipments amid a payments row with the United Nations.
A barrel of North Sea Brent reference crude pushed up as high as $32.19 from $31.88 at Thursday's close.
Analysts said the market had already priced in a halt in Iraqi exports and added that investors had already been reassured by hopes that the shortfall could be made up elsewhere, most notably by an increase in Saudi exports and US use of its special petroleum reserve.
"People in the market were expecting a complete halt from midnight last night," said Lawrence Eagles, an analyst with the GNI brokerage. "I think we will see a little bit of a rebound this morning."
A spokeswoman for Turkey's state oil and gas company, Botas, said Friday that Iraq had cut off supplies without prior notice through the Turkish port of Ceyhan late Thursday.
Walid Khadduri, editor of the authoritative Nicosia-based Middle East Economic Survey (MEES), said that exports had also stopped from the Iraqi port of Mina-al-Bakr.
Khadduri predicted little effect on prices, saying that the problem was in the supply of refined oil, not crude.
"If it goes on for two or three weeks it will even save OPEC having to cut production," he added.
Khadduri said much depended on what the United Nations Security Council decided with regard to the next instalment of Iraq's oil-for-food programme.
"Monday and Tuesday will be interesting days to watch," he said. "There are different resolutions before the Security Council, and a compromise may be found which will satisfy Baghdad."
Khadduri said that the halt in exports should be seen as part of Iraq's strategy to erode the UN sanctions in force since its invasion of Kuwait 10 years ago.
Iraq has been exporting an estimated 2.4 million barrels of oil a day, almost all of it through the Ceyhan terminal.
It had asked buyers to pay a 50-cents a barrel surcharge, to be paid into a separate account not under UN supervision, but they reportedly refused.
"Baghdad underestimated how far it could push the oil companies, which would also be answerable to the UN and at the risk of legal action," Khadduri commented.
The move coincided with the end of the latest 180-day phase of the oil-for-food programme, which allows Iraq limited exports of its oil to pay for essential supplies for its people.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)