August 9, 2004

LONDON (Reuters) - Oil prices climbed back near record highs Monday as a Shi'ite Muslim uprising threatened to engulf Iraq's oil industry, reigniting concerns about tight international supplies.

U.S. light crude rose 4 cents to $44.35 a barrel, less than 50 cents shy of Friday's record of $44.77, the highest price since the New York Mercantile Exchange launched oil futures in 1983. London Brent crude rose 45 cents to $41.08.

Prices rose as Iraqi armed militia roamed the southern oil production center of Basra and insurgents hit the oil ministry compound in Baghdad.

Guards along the two pipelines, that link oilfields to two offshore terminals in the Gulf, were on alert. Attacks against the pipelines, which deliver all of the country's 1.9 million barrels per day of exports, have stopped loadings several times this year.

A shipping agent said flows from the country's southern terminals were normal on Monday and officials said they should continue uninterrupted.

Prices have rallied more than 30 percent this year as rapid demand growth, especially in the United States and China, has left little leeway for any supply disruptions. Consumption is accelerating at its fastest pace in more than 20 years.

Prices rose even though an official at Russia's state railways said it expected no disruptions in Yukos' oil and refined oil products exports after August 10, when the firm's deadline to pay shipping fees expires.

Yukos continues to battle bankruptcy due to a multi-billion-dollar tax debt case, which threatens to bring its day-to-day operations to a halt, including oil exports. Yukos, Russia's biggest oil-exporting firm, pumps 1.7 million bpd of crude, or two percent of global supply.

"No supplies will be stopped after August 10. We will continue to work as we have been working in the past because it is in the state's interest," Marina Kovshova, head of Russian state railways' marketing department, told Reuters.

Yukos shares shot up Monday after a late Friday court ruling against bailiffs' seizure of its main oil unit, deemed the firm's biggest victory yet in its fight for survival.

The seizure of Yuganskneftegaz, which accounts for more than 60 percent of Yukos' total output, and the planned sale of the unit were potentially the most crippling moves threatened by bailiffs charged with collecting $3.4 billion in taxes from the company.

There are also worries that supplies from Venezuela, the world's fifth largest exporter, may be disrupted during a referendum on Aug. 15 on the rule of President Hugo Chavez.

A two-month strike by opponents of leftist Chavez late in 2002 temporarily halted the OPEC producer's overseas sales and caused oil prices to spike.

The Organization of Petroleum Exporting Countries, which controls around half of the world's crude exports, is pumping at the highest levels since 1979 as it tries to stem oil's relentless price rise.

OPEC output is running at 30 million barrels daily and president Purnomo Yusgiantoro said last week that the group was ready to lift production by 1 to 1.5 million bpd if deemed necessary when ministers next meet.

The group is scheduled to meet in Vienna on Sept. 15 to review output policy, but only Saudi Arabia has any significant spare capacity to increase supply.

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