Oil holds firm after Iraq sabotage

World oil prices held strong yesterday following Thursday's pipeline sabotage attack in Iraq, which has brought market focus sharply back on to thinly stretched supply capacity.

US light crude eased 21 cents to $43.85 a barrel within $6 of August 20's $49.40 record high. London Brent futures were up three cents to $41.60 per barrel.

Thursday's attack on Iraq's northern oil export network, the fiercest yet, halted export pumping. Fire was still raging on the northern pipeline after it was attacked around 70 km southwest of the oil centre of Kirkuk.

Iraqi officials said the resulting fire would take two days to douse. Exports through the pipeline were halted until further notice.

Weekly US inventory data on Wednesday showing crude stocks in the world's leading oil consumer at their lowest in five months had already brought the market up sharply from six-week lows hit early in the week.

"The factors that we have seen driving this rally are still in place," said Michael Lewis, head of commodities research at Deutsche Bank in London.

The US job market brightened modestly in August as employers added 144,000 workers to payrolls and weak job tallies for the two prior months were revised up, the Labour Department said yesterday.

The US August unemployment rate fell to 5.4 per cent - the lowest since a matching 5.4 per cent in October 2001 - from 5.5 per cent in July.

"We need to see a real downward revision to global growth for the market to turn bearish," said Deutsche Bank's Lewis.

The Opec cartel has said it is doing all it can to control prices, which are being driven by soaring world demand and Middle East political instability.

A Reuters survey showed that cartel members, already pumping near 25-year highs, raised supply again in August as higher output from Saudi Arabia countered disruption from sabotage attacks in Iraq.

Total August output from the Organisation of the Petroleum Exporting Countries rose 100,000 bpd to 29.6 million bpd, the survey of consultants, shippers, industry and Opec sources showed.

A senior Opec official based in the Middle East said on Wednesday the cartel's ministerial meeting on September 15 might raise its formal oil output ceiling closer to its actual supply.