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By Jason Simpkins
After surging nearly $5 Wednesday, light, sweet crude for May delivery rose as much as $2.05 to $107.95 a barrel on the New York Mercantile Exchange yesterday (Thursday) as concerns about violence in Iraq compounded the effect of supply concerns.
A bomb exploded at the Zubair-1 pipeline in Basra, which transports crude to export terminals at the Persian Gulf, Wednesday. Basra is the third largest city in Iraq, and has been the staging ground of several clashes between Iraqi forces and militants loyal to Muslim cleric Moqtada al-Sadr.
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Iraq's average production in the month of February was 2.4 million barrels per day. Basra Rumaila South and North oil fields produce approximately 1.3 million barrels per day. The city is also the site of one of Iraq's largest refineries, the Shuaiba refinery that has been operating at a capacity of 100,000 barrels a day, short of its full capacity. An average of 1.54 million barrels of oil day flow through the city of Basra each day.
Oil Minister Hussein al-Shahristani has said that escalating violence and clashes in the region would not affect oil exports and drilling operations but the Zubair-1 pipeline is the second such attack this week. On Tuesday night, a bomb damaged a domestic oil pipeline that links the Noor oil field in the southern Maysan province to the refinery in Basra. It was expected to take several days to repair the damage.
The recent spate of violence has cast serious doubts about security in the region and sent the price of crude soaring.
"The market will get significantly tighter if the roughly 2 million barrels a day we get from southern Iraq is taken offline," Rick Mueller, director of oil practice at Energy Security Analysis Inc. told Bloomberg.
Also contributing to oil's latest climb was a report from the Energy Information Administration that showed a sharp decrease in inventories. While crude inventories held steady, gasoline inventories fell 3.3 million barrels, more than four times the decline analysts anticipated. Despite the decline, gasoline inventories are still 9% higher than they were a year ago.
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