Oil hangs at $120

August 8, 2008
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, SINGAPORE, August 8 – Oil prices held around 120 dollars a barrel in Asian trade Friday on jitters sparked by the disruption of a pipeline carrying crude from Central Asia to the West.

In afternoon trade, New York\’s main contract, light sweet crude for September delivery was down 23 cents at 119.79 dollars a barrel after rebounding 1.44 dollars to close at 120.02 dollars a barrel in closing US trade Thursday.

Brent North Sea crude for September was down 26 cents to 117.60 dollars per barrel.

"It\’s still hanging around the 120-dollar level. It has edged down a bit but that\’s just part of the volatility of the market," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

"Supply side issues will continue to oppose the price slide while the concerns over slackening US demand will weigh down on prices."

Sucden analyst Andrey Kryuchenkov said: "Overall, the market remains at a crossroad. Market participants are torn between persistent fears over slowing energy demand and potentials for further supply disruptions."

One supply side risk comes from the shutdown of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline due to a blast at a pump in eastern Turkey, Shum said.

The pipeline will remain shut for about 15 days, an official from Turkey\’s state-run oil and gas company BOTAS told Anatolia news agency Thursday, but analysts said it could be longer.

"The BTC pipeline outage could last up to five weeks. That represents a significant disruption to non-OPEC supply," Shum said, referring to the Organisation of Petroleum Exporting Countries.

Inaugurated in 2006, the pipeline carries oil from the Caspian Sea fields to Turkey\’s Mediterranean port of Ceyhan, where tankers transport the crude to Western markets.

British energy giant BP said it was looking at three alternative means of delivering supplies to Western clients, and a BP spokesman told AFP that the company had begun to limit its output.

"We have ramped down production," the spokesman said.

BP was looking into transporting the oil out of Azerbaijan either by rail, a Russian pipeline as far as the Black Sea, or via a pipeline that ends in Georgia, he said.

News of the disruption sent oil prices boiling. Prices had been easing due to concerns that slower economic growth in the United States, the world\’s biggest energy guzzler, would translate into a decline in global energy demand.

Crude futures also lost ground after a surprise jump in US oil reserves, traders said.

Oil futures have shed about 20 percent in value since hitting record highs above 147 dollars per barrel on July 11.

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