Oil prices on the rise

New York crude settled up 39 cents at $31.95 a barrel, bolstering gains of around $2, or 7% over the last month. In London, benchmark Brent crude ended 7% higher at $29.77 a barrel.

Prices are within $1.50 a barrel of five-month highs hit earlier this month as low US gasoline stocks and a slower than expected recovery in Iraqi production underpin concerns over slender international supplies.

Growing signs of economic recovery in the United States and Japan, both big oil importers, have encouraged speculative hedge funds to build up large long positions in recent weeks.

A US government report on Wednesday is forecast to show a further decline in petrol stocks as distributors buy supply ahead of the 1 September Labour Day demand rush.

Government data last week showed US petrol supplies had fallen to just under 197 million barrels, nearly 13 million barrels below last year. A survey of analysts forecast a further two million barrel decline in Wednesday’s report.

The American Automobile Association said it expects a record 28.2 million US travellers to drive more than 80 km over the upcoming Labour Day holiday weekend, up 2.2% from last year.

Analysts predicted US crude stocks rose by one million barrels after the massive North American blackout slowed refinery activity earlier this month.

Delays in the post-war recovery of Iraq’s oil sector have held stocks in major consuming countries below normal levels and pushed prices back to the area that some analysts warn can hurt economic growth.

Production from southern Iraq has hit capacity of 1.2 million barrels per day, but power cuts will make it difficult to keep pumping at that level, a senior oil ministry official said over the weekend.

Output in the south has fluctuated between 200,000 bpd and 1.2 million bpd due to theft of power cables that have made it difficult to move and export oil.

Resistance fighters have also blown up parts of the country’s northern export pipeline to Turkey. The line takes oil from the northern oilfields of Kirkuk, the source of 40% of Iraq’s crude, to Ceyhan, Turkey, where it is exported to global markets.

Production from Iraq’s northern fields should rise by more than 50% to 770,000 bpd by year’s end, near pre-war levels a top US army official in the region said on Tuesday.