Oil prices rise as Iraq pipeline blast adds to worries about U.S. fuel supply

By George Jahn, The Associated Press

VIENNA, Austria - Oil prices rose by more than US$1 a barrel Thursday as the bombing of a key Iraqi pipeline extended a buying spasm spurred by an anemic U.S. dollar and lower American fuel inventories.

Crude prices, which had already spiked by $4.68 on Wednesday, were propelled higher by the second bombing in a week in Basra, where Iraqi security forces have been clashing with Shiite militia fighters.

Oil Minister Hussein al-Shahristani said ongoing fighting would not affect oil exports and drilling operations.

But with an average of 1.54 million barrels a day transiting the southern city last month, an official who demanded anonymity acknowledged that the blast could impact crude sales.

Iraq's average production for February was 2.4 million barrels per day, and exports averaged 1.93 million barrels per day.

The Basra Rumaila oilfields produce around 1.3 million barrels per day, and the latest bomb exploded under the Zubair-1 pipeline that carries crude from Basra Zubair toward Iraq's two exporting terminals on the Gulf.

Light sweet crude for May delivery topped US$107 a barrel after the news, trading later in the morning at US$106.83, up 93 cents.

The previous day's spike followed the release of U.S. Energy Department data showing that U.S. stockpiles of gasoline, heating oil and diesel fuel fell more than forecast last week.

This stoked worries that stockpiles of gasoline are falling right when analysts would like to see them rising - before the peak summer driving season. Gasoline inventories slid by 3.3 million barrels last week, though they remained nine per cent higher than a year ago.