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Oil Pulls Back after Rise on Iraq Blast | ASHARQ AL-AWSAT English Archive 2005 -2017
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LONDON (Reuters) – Oil eased to near $107 a barrel on Friday as crude flows though Iraq’s pipeline system were restored after disruption by a bomb attack a day earlier.

U.S. crude dropped 50 cents or 0.4 percent to $107.08 a barrel by 5:25 a.m. EDT, off lows of $106.29. It had settled $1.68 higher on Thursday.

London Brent crude was 20 cents down at $104.80 a barrel.

On Thursday saboteurs attacked Iraq’s southern pipeline system on the third day of a military operation against fighters loyal to Shi’ite cleric Moqtada al-Sadr in the oil port of Basra.

But by Friday the southern oil pipeline system, which usually pumps at least 1.5 million barrels per day (bpd), was flowing at above normal levels to the Basra export terminal.

Analysts said the attack — the first disruption to the flow from Iraq’s south since 2004 — could prompt the market to attach a higher “fear premium” to prices, as it raised the risk to previously stable supplies.

“It’s not the loss of oil that drove prices higher, it’s the return of instability to the region that concerns traders,” noted Robert Laughlin at MF Global.

Iraq shut down the system on Thursday as a precaution before extinguishing a fire on one of the pipelines.

Officials said investigations showed that none of two main pipelines were affected by the attack and the only damage was to a smaller pipeline.

Oil prices still remain 5 percent higher on the week, within sight of their mid-March record high of $111.80, following an unexpectedly deep decline in weekly U.S. fuel stocks, a weak U.S. dollar and helped by strength in heating fuel prices.

With concerns about Iraqi supplies out of the way for now, analysts expect the market’s focus to return to other issues, notably the economic woes in the United States, the world’s top oil consumer.

Crude oil’s gains on Thursday had been led by heating oil which surged more than 3 percent, partly boosted by news of a brief outage at South Korea’s S-Oil refinery, which forced it to cancel diesel supply contracts for April.

April heating oil retraced gains on Friday, falling by 0.4 percent to $3.1350 a gallon by 5:23 a.m. EDT.