Oil Prices Rise On Yukos Woes, Hurricane Impact

LONDON (AFP) - Oil prices climbed to the highest level for almost one month after Russia's embattled oil giant Yukos slashed deliveries to China and as traders fretted over the impact of hurricanes on supplies.
The price of Brent North Sea crude oil for delivery in November rose 28 cents to 42.73 dollars per barrel in late afternoon deals Monday.
Prices touched 43.17 dollars in early trading, the highest level since August 23.
On the New York Mercantile Exchange, light sweet crude for October delivery advanced 71 cents to 46.30 dollars in early deals, also a near-one month peak.
Yukos said it was partly suspending its oil shipments to China, halting deliveries to the China National Petroleum Company, because of difficulty in paying for transport costs.
A Yukos spokesman told AFP that CNPC, which accounts for 60 percent of Yukos's oil sales to China, was informed Friday of the suspension of deliveries, which would take full effect on September 28.
"Prices are up because of Yukos and the US stocks (supplies)," GNI Man-Financial trader Robert Laughlin said.
"The US stocks are a big concern as there is still news that oil imports in the US could be disrupted by the hurricane."
The US Energy Department reported last week that crude oil inventories, or stocks, tumbled by 7.1 million barrels to 278.6 million in the week to September 10, reaching the lowest levels in nearly seven months.
Traders are bracing for further falls in the wake of Hurricane Ivan.
Societe Generale analyst Frederic Lasserre predicted that prices could head towards record high levels of almost 50 dollars per barrel seen in New York last month should Iraq add to current supply worries.
"If in addition we see accidents in Iraq, we will return towards the (price) levels that we saw in August. That is certain," he said.
Key pipelines in Iraq have been hit by a series of sabotage attacks in recent weeks, forcing production to be halted.
There were worries that tropical storm Jeanne, which has killed at least 50 people in Haiti, could further disrupt US supplies.
As for Yukos, "the fear of the market is that the problem could spread to other countries than China and we could see the end of Yukos as we know it. The market is very nervous", Laughlin said.
China is increasingly turning to oil imports due to strong domestic demand with total consumption expected to reach 308 million tonnes this year, the International Energy Agency has said.
Yukos, the largest oil producer in Russia, has been the sole provider of Russian oil to China but the company's financial difficulties have raised doubts about its capacity to continue.
The firm's oil represents roughly seven percent of Chinese consumption at 400,000 barrels per day.
Yukos faces a multi-billion-dollar tax bill from the authorities that it has been unable to pay because of a court-ordered freeze on its assets.
Oil markets were likely to remain tight over the coming months, warned the Centre for Global Energy Studies.
The Organization of Petroleum Exporting Countries is estimated to have spare production capacity of no more than 1.5 million barrels per day, the consultancy said in a report.
"This leaves only the thinnest margin to cope with the unexpected and the market is worried that it could quickly be used up in the event of an interruption to supply or a cold winter (in the northern hemisphere)," it warned.