Oil rises $1 over Iraq industry fears

US CRUDE oil futures ended more than a dollar higher yesterday as analysts warned the death of Iraq’s al-Qaida leader Musab al-Zarqawi on Thursday would not end threats to Iraq’s battered oil industry.

There are other militant groups that could intensify their efforts to carry out sectarian violence and continue to destabilise oil production and shipments, the analysts said.

Traders were also covering short positions ahead of the weekend as a close watch for potential tropical storms began, with the Atlantic hurricane season under way.

Petrol bounced higher on short-covering, traders said.

Crude for July delivery last traded up $1.25 (€0.98) at $71.60 (€56.62) a barrel after peaking at $71.80 in a rebound after three days of losses on the New York Mercantile Exchange.

In London, July Brent crude rose $1.49 (€1.18) to $70.54 (€55.78).

“Neither Zarqawi nor al-Qaida appear to have been major factors behind pipeline attacks in Iraq, so his death is unlikely to boost oil infrastructure security in the short term,” said

Antoine Halff, analyst at Fimat in New York.

NYMEX July petrol gained 4.78 cents at $2.15 (€1.70) per gallon, with July RBOB last trading at $2.305 (€1.82), up 2.63c.

“There’s some short-covering going on and with the hurricane season now on, traders don’t want to leave short ahead of the weekend,” said Tom Knight, trader at products marketer Truman Arnold in Texas.

On the weather front, the US National Hurricane Center in Miami said widespread cloudiness and showers over the northwestern Caribbean Sea and adjacent land areas are associated with an area of low pressure centred a couple of hundred miles east of the Yucatan Peninsula.

The system was showing signs of organisation yesterday but winds were only somewhat conducive to additional development, it said.

A tropical depression could still form during the next day or two as it moves slowly northward, it added.

On Thursday, Iraqi Oil Minister Hussain al-Shahristani said from Istanbul that the death of Zarqawi would help improve Iraq’s oil production, particularly in the north.

But analysts doubted that could happen soon. There are various groups thought to be behind sabotage that has kept Iraq struggling to keep pumping two million barrels per day, down from about 2.5m bpd before the U.S.-led invasion in 2003.

On the same day Zarqawi was killed, sources said Muthana al-Badri, director general of Iraq’s State Company for Oil Projects, was on his way home in the Sunni district of Adhamiya when gunmen stopped his car, abducted him — but set his driver free.