Oil prices briefly jumped above $107 Thursday morning on news that saboteurs had blown up a major Iraqi export pipeline, the Agence France-Presse reported. Oil rose $1.26 to $107.16 per barrel in early trading Thursday, before moderating some, to about $106.50. The other major energy commodities also jumped on the news in early trading Wednesday. Heating oil rose about 5 cents to $3.09 per gallon, unleaded gasoline added 1 cent to $2.72 per gallon, and natural gas rose about 3 cents to $9.43 per million BTUs.
One of Iraq's two main oil export pipelines near the southern city of Basra was blown up by saboteurs on Thursday, Samir al-Maksusi, Southern Oil Company spokesman, told the AFP. The pipeline transports oil from the Zubair oil field to the Al-Faw storage facility, where it is exported.
Oil spikes
The Iraq incident marks the second consecutive day a bullish data point has pushed oil prices substantially higher, and underscores the skittish price qualities of the world's most vital commodity, according to independent energy trader Jim Dietz. Dietz said that heading into the week many traders had expected oil to continue to trend lower on sluggish demand for oil and oil products in the U.S., due to its economic slowdown.
However, Wednesday's surprisingly sparse U.S. weekly oil inventory report from the U.S. Energy Information Administration, which revealed no build in inventories, and Thursday's Iraq incident have sent oil $7 higher in about two days, stopping-out many oil bears along the way, Dietz said. Dietz, currently a bull, added that he remains long with several monthly contracts in oil and unleaded gasoline, but he did close-out several other, profitable oil-long contracts earlier in the week.
Pain at U.S. gas pump
Further, oil's persistent above-$100 price will make it hard for refiners to provide some relief for U.S. motorists at the gas pump, Dietz said. Oil's stratospheric price keeps refiners' core commodity costs elevated, preventing them from passing on a 10-15 cent price cut that would have occurred had oil remained below $100, he said.
As a result, Dietz said U.S. gasoline prices, currently averaging about $3.25 per gallon nationally, are almost certain to rise 20-25 cents as the nation enters its driving season this spring. Motorists in some higher-cost regions, such as San Francisco, Los Angeles, and New York, may see a 30-40 cent jump, he said.
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