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Last Updated: Tuesday, 8 August 2006, 21:47 GMT 22:47 UK
Oil eases despite BP uncertainty
Oil traders on the New York Mercantile Exchange
Traders are nervously awaiting further news from BP
Oil prices have fallen back after hitting record highs on Monday, despite uncertainty as to when BP's key Prudhoe oilfield will resume production.

BP is closing the field, responsible for 8% of daily US oil output, after finding corrosion in transit pipes.

The company said that it could take "weeks or months" to resume output from the 400,000 barrel per day field.

Later on Tuesday a BP spokesman said it was looking at ways of maintaining some level of production from the site.

It said that it had decided to replace the main oil transit lines at Prudhoe Bay, and that it was clearing up the five barrels-worth of oil that had spilled from the corroded pipes.

The site is in the North Slope region of Alaska - a joint venture with other leading oil firms including Exxon Mobil and ConocoPhillips.

The price of oil in London had hit a new record after the shutdown was announced, on fears that limited spare capacity in the global oil market would be further narrowed.

By Tuesday Brent crude futures had dipped to $77.55 a barrel, after hitting a high of $78.64 on Monday.

US light, sweet crude slid 67 cents to $76.31 a barrel on profit-taking, having risen as high as $77.30 the day before.

Spare capacity

The shutdown of the Prudhoe Bay oil field comes at a time when conflict in the Middle East and other geopolitical concerns mean oil markets are already jittery.

"There is the Iranian nuclear situation, Israeli action in Lebanon and now we've got rusting infrastructure," said David Dugdale, an analyst at MFC Global Investment Management.

"It's very hard to be bearish at the moment... I think prices are going to stay high and volatile."

Their image will take a hit
Athan Manuel
Arctic Wilderness Campaign

Producers' group Opec has insisted that it has enough spare capacity to meet any shortfall in supplies, but analysts say Prudhoe's shutdown will reduce the "oil cushion" to less than two million barrels a day.

BP shares fell 1.4% on Tuesday, having dropped 2% on Monday after the shutdown was announced.

Environmental reputation

The closure of Prudhoe Bay comes just six months after a major oil spill at the site, now the subject of a criminal investigation.

Athan Manuel, director of the pressure group Arctic Wilderness Campaign, said recent events at Prudhoe meant BP's "progressive" environmental reputation would come under scrutiny.

"Their reputation will suffer, perhaps justifiably," he told the BBC. "They have earned their green reputation... but their image will take a hit."

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