Oil prices rebound on US report

Iraq continues to be hit by attacks on oil pipelines

The price of oil rose more than $2 a barrel following an eight-day run of losses, as a US report showed crude oil stocks at their lowest since March.

US light crude went up by $2.13 to $44.25 a barrel, and London Brent crude was $2 higher at $41.61 a barrel.

The increase came as the US Energy Information Administration (EIA) said crude stocks dropped 4.2 million barrels last week to 287.1 million. Crude stocks have fallen by 18 million barrels, or 6%, since early July.

Refineries have been operating at more than 95% of capacity to meet summer vacation driving demand.

The drop in crude oil stock comes at a time when world supplies are being stretched, with global demand growing at the fastest rate in 24 years.

'Price pressure'

The EIA said world crude production was running at about 99% of capacity, indicating likely future price rises.

"Any industry in which production is running at 99% of capacity to meet demand is likely to experience price pressure.

"There is no reason to expect that crude oil markets would not reflect these same fundamental economic forces," the EIA said in its weekly review of the oil market.

Demand remains at a 24-year high, led by rising consumption in China and the US.

The situation has been exacerbated by the continued sabotage of facilities in Iraq, which has hit exports from Iraq and added to oil market unease.

Opec meeting

On Wednesday, an oil pipeline was on fire in northern Iraq, in the vicinity of the main Kirkuk-Ceyhan export route.

This week, Iraq resumed shipments of northern Kirkuk crude from Turkey's export terminal Ceyhan after a three-month stoppage.

Crude exports from southern Iraq recovered on Tuesday to near-full capacity, following repairs to sabotaged pipelines.

The Organization of Petroleum Exporting Countries (Opec) is due to raise its formal oil output ceiling to try and stabilise prices when it meets on 15 September.

Opec countries now produce 30 million barrels a day, up from 29 million barrels in July.

The producers' group aims to produce a further one million barrels a day by the end of 2004, although analysts believe the organisation's members are already producing at near capacity.