Oil prices set new records - 17 August, 2004

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.

Fresh disruption to Iraq's oil exports and warnings that YUKOS' financial crisis could ultimately cut into oil shipments bolstered 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 28 cents at $46.30 a barrel, off an early peak of $46.91 a barrel which was the highest since the New York Mercantile Exchange launched oil futures 21 years ago.

Prices have set new records in all but one of the last 12 trading sessions. London Brent was down 28 cents at $43.60 a barrel, after also hitting a new record at $44.11.

Prices made only modest falls following Venezuelan President Hugo Chavez' survival of a 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, informs Reuters.

OPEC members including Saudi Arabia this month will pump at capacity, said United Arab Emirates energy minister Obaid bin Saif al-Nasseri.

``With these prices all producers will go to the maximum they can,'' al-Nasseri said, when asked of his expectation for OPEC output including Saudi Arabia. ``There's no shortage in the market. All our customers are well supplied.''

OPEC already boosted its official quotas on July 1 and Aug. 1, though in practice most members are pumping as much as they can. The group meets next on Sept. 15 in Vienna.

The International Energy Agency, which coordinates the use of government oil reserves to avert shortages, sees no need yet to tap its stockpile, said Klaus Jacoby, head of emergency planning at the Pairs-based agency.

``For the time being, we don't think there is a severe supply disruption but we think there is a severe increase in price,'' Jacoby said in a telephone interview from Paris. ``We have plans on the shelf. We're clearly saying we could activate them, if needed, within 48 hours.'', reports Bloomberg.

In accord with the Canadian Press, Petroleos de Venezuela S.A. spokesman Mario Socorro said crude exports were not disrupted during the referendum.

The referendum followed a two-year drive to oust Chavez, which included a short-lived 2002 coup, a devastating two-month strike and political riots last March that claimed a dozen lives.

Traders also were weary of continuing unrest in Iraq. Journalists have been ordered to leave the holy city of Najaf after talks between the Iraqi interim government and forces loyal to radical Shiite cleric Muqtada al-Sadr broke down.

Two weeks of continuous fighting have put crude pipelines at risk there, traders said, as militants threaten more attacks on the vital pipelines -which produces around 1.7 million barrels a day, or around five per cent of the world's daily supply.

Traders will also monitor developments surrounding Russian oil giant Yukos on Monday.

The company, which pumps roughly 1.7 million barrels a day, needs to pay the Russian government $3.4 billion in back taxes, and there are fears it might have to shut down as bankruptcy looms.