Oil at new high on Iraqi violence

The ongoing violence in Iraq is continuing to push up oil prices

The price of oil has reached yet new record highs due to continuing concern at the ongoing violence in Iraq.

In New York the price of a barrel of US light crude rose 70 cents to a record daily settlement of $45.50, having touched a record $45.75 during the day.

In London, Brent crude climbed 72 cents to a record closing price of $42.29, having earlier hit a record $42.56.

The fresh highs come after militiamen loyal to Moqtada Sadr threatened new attacks on Iraqi oil facilities.

The threats have forced Iraqi officials to close one pipeline as a precaution, and oil exports are down by half.

The unremitting rise in oil prices led to further weakness on Wall Street, where the benchmark Dow Jones Index dropped to its lowest level since November.

The index fell 124.03 points, or 1.25%, to 9,814.29.

"There is nothing stopping this market," said Tom Bentz, a trader at BNP Paribas Commodity Futures.

"Every time it dips, people have bought."

Demand pressures

Iraq is only currently able to export oil at a rate of 41,000 barrels an hour, compared with the usual 80,000.

Most of the oil goes through the British patrolled southern city of Basra, where Sadr's followers have threatened to attack oil facilities unless US forces stop their military action in the Iraqi holy city of Najaf to the north.

The Americans are however continuing with their efforts to stop the insurgency in Najaf, surrounding the centre of the city in fierce fighting.

Everything's gone wrong in the oil market recently David Thurtell, Commonwealth Bank of Australia

The reduced oil output from Iraq could not have come at a worse time for a global oil market where supply is struggling to keep up with strong demand.

Saudi Arabia said on Wednesday that it was ready to pump as many as 1.3 million extra barrels a day of oil to try to cool runaway prices, but this had little effect on oil costs.

"Everything's gone wrong in the oil market recently," said David Thurtell, commodities strategist at Commonwealth Bank of Australia.

"If you wanted to paint the worst scenario picture, you couldn't do much better."