Associated Press
Oil Prices Hit All-Time High of $47.96
Thursday August 19, 10:20 am ET
By Michael Mcdonough, Associated Press Writer
Crude Oil Prices Rocket to All-Time High of $47.96 Per Barrel, Despite Iraq's Export Reassurances

LONDON (AP) -- Crude oil prices rocketed to a record intraday high of $47.96 per barrel Thursday despite reassuring comments from Iraq that it would resume full oil exports from its southern terminals.

The spike raised fears that the psychologically important $50 mark could be breached.

U.S. light crude stood at $47.89 per barrel on the New York Mercantile Exchange at midmorning -- up 62 cents from Wednesday's closing price of $47.27.

That was the highest Nymex closing price on record, although when adjusted for inflation oil still costs about $10 less per barrel than it did leading up to the first Gulf War.

On Thursday, Iraqi oil minister Thamer al-Ghadhban said the country was prepared soon to resume pumping its capacity of 1.7 million barrels per day from its current levels of around 1 million per day. Forces loyal to radical cleric Muqtada al-Sadr had earlier threatened to blow up crucial oil pipelines, prompting a temporary stop to the flow of crude.

"We will resume full south oil exports shortly," Ghadhban said at a news conference in Baghdad.

However, the situation remained tense in the holy city of Najaf in southern Iraq. Al-Sadr on Thursday rejected a government ultimatum to disarm his militia immediately and pull them out of a Shiite shrine there without conditions, an al-Sadr aide said.

Minister of State Qassim Dawoud said earlier Thursday that if al-Sadr's Mahdi Army militia did not give up without negotiations, the government would raid the shrine within hours.

Analysts said the uncertainty could see prices continue to rise -- "$50 isn't so unreasonable anymore," said Victor Shum, oil analyst at Texas-based energy consultants Pervin & Gertz in Singapore.

"On the demand side of the equation, China seems to be going strong. Despite efforts to cool down the economy, it hasn't made a significant change in the demand for oil production," he said, adding that it was the same in the U.S. where the economy was still "robust and stable."

The price of crude is more than 50 percent higher than a year ago and has spiked by almost 30 percent in the past six weeks.

On London's International Petroleum Exchange, Brent crude futures for October delivery traded at $43.66, down from an intraday high of $43.80. The intraday record for Brent crude is $44.11, set on Aug. 16.

The rally was kick-started by an Energy Department report Wednesday that showed widely expected declines in U.S. inventories of oil and gasoline which showed commercial crude supplies were down by 1.3 million barrels to 293 million barrels.

Analysts and traders also remained concerned over developments and a possible cut in supply from Russia and Venezuela, both major crude exporters.

Russian oil giant Yukos continues to teeter on the brink of bankruptcy as the government tries to collect $3.4 billion in back taxes -- a move that threatens to cut off Yukos' daily crude supply of 1.7 million barrels.

In Venezuela, the world's fifth-largest exporter, opposition leaders refused to participate in an audit of last Sunday's referendum to oust President Hugo Chavez -- which officials say he won convincingly.

As prices spike, analysts continue to be wary of Organization of Petroleum Exporting Countries claims it could raise its production capacity immediately to meet demand and cool prices.

"It's a Catch-22. There isn't much more capacity and even if OPEC increases it, it won't cause any significant dent because there is still instability around," said Shum.

"Then what happens? There is even less spare capacity and it will make the situation worse psychologically."

Associated Press Writer Yeoh En-Lai in Singapore contributed to this report.