Posted on 07/28/2004 6:21:47 PM PDT by DaiHuy
LONDON (Reuters) - Oil prices hit their highest level in at least 21 years on Wednesday after bailiffs ordered beleaguered Russian oil giant YUKOS to stop sales, threatening further strain on tight international supplies.
The news intensified concerns over the lack of spare capacity in the international oil system, as the OPEC cartel pumps at its highest level for a quarter of a century to meet strong global demand growth.
Gains accelerated after a weekly U.S. government report showed just a small build in crude stocks and a fall in gasoline inventories even though crude imports into the country were at the highest weekly level ever.
U.S. light crude rose $1.21 to $43.05 a barrel -- topping peaks hit in early June and the highest price since the New York Mercantile Exchange launched the contract in 1983. London Brent crude rose $1.06 a barrel to $39.60 a barrel, its highest level since October 1990, ahead of the first Gulf War.
Prices jumped after a company source said Russian bailiffs told YUKOS' four production units, which together pump 1.7 million barrels a day of oil, to halt sales of property -- including oil.
YUKOS said it had not complied with the order and was continuing to operate while it sought clarification of what chief executive Steven Theede called a "misinterpretation."
YUKOS has said it faces imminent bankruptcy as courts seek to enforce a $3.4 billion tax debt for 2000.
A halt to sales would hasten the collapse of the company, which pumps around 20 percent of Russian crude supply. Russia is the world's second biggest oil exporter behind Saudi Arabia after five years of rapid production growth.
Theede has asked for access to YUKOS frozen bank accounts to avoid a production halt later this week.
STRETCHED TO THE LIMIT
If the YUKOS turmoil prevents Russian production from meeting forecasts for further growth, the global oil supply system will be even more pressed to meet rising demand, analysts say.
The lack of a supply cushion in the event of an attack against the Middle East oil infrastructure has encouraged heavy buying from big money speculative funds.
OPEC has already jacked up production to 30 million barrels per day -- the highest level since 1979 -- to meet breakneck consumption growth in China and the United States.
Saudi Arabia has led the supply increase, eager to stop prices rising to a level that would hurt world economic growth and stunt fuel demand.
OPEC President Purnomo Yusgiantoro of Indonesia said that the cartel was doing its best to get prices down. "We are very sincere about pushing the price to be stable below $30 per barrel," he told Reuters.
But Venezuela's oil minister said OPEC had little spare capacity to help lower prices. "Most of the countries are near their production limits," Rafael Ramirez told Reuters.
Higher OPEC production helped push U.S. oil imports to the highest level ever last week at 11.3 million bpd, the U.S. Energy Information Administration said in its weekly report.
The high imports helped push crude stocks up 1.2 million barrels last week to 300.5 million barrels, around average for the time of year.
Refiners have struggled to turn ample crude supplies into higher refined product inventories, underpinning oil's price strength.
Gasoline stocks fell 700,000 barrels to 207.7 million barrels even though gasoline imports rolled in at the second highest weekly level ever, the EIA said.
Damn Russians are paying us back for the 1980's low prices that bankrupted them.
Bump!
Thanks, to bad others don't think it is so important
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