World oil prices smashed through $47 a barrel for the first time today amid worries about supply threats in Iraq and Russia and a drop in US crude oil inventories.
However, prices later fell back on reports from Iraq that Shiite militia leader Moqtada Sadr had agreed to disarm and quit a holy shrine in Najaf.
New York's benchmark contract, light sweet crude for delivery in September, reached a new record of $47.35 a barrel in early deals. The main New York contract later pared gains to stand up 10 cents at $46.85 a barrel.
Meanwhile in London, the price of Brent North Sea crude oil for delivery in October dropped 24 cents to $42.75 a barrel in late afternoon deals.
Export of crude from Iraq's southern oil terminals has been cut by half to around 40,000 barrels per hour for a week because of threats to infrastructure from Shiite Muslim militia.
Markets were also digesting US government figures showing that crude oil inventories in the week to August 13 dropped 1.3 million barrels to 293 million. Gasoline stocks declined 2.6 million barrels to 205.7 million.
OPEC, meanwhile, said that the cartel's oil production will be more than enough to cover demand at the end of this year and in 2005. Output by the Organisation of Petroleum Exporting Countries should reach 30 million barrels per day this month, and could increase to 30.5 million in September, its monthly report said.
The cartel also upgraded its forecast for oil demand this year by 280,000 barrels per day to 81.18 million bpd.
Also supporting prices today was the saga surrounding embattled Russian oil titan Yukos, reportedly in the process of selling a 56% stake in a Siberian natural gas company in a bid to pay off its crushing tax bill.
The Russian newspaper Kommersant, along with The Wall Street Journal and the Financial Times, reported that the sale of Rospan to the Anglo-Russian joint venture TNK-BP has been concluded and that Yukos collected $357m in the process.
Yukos produces about 1.7 million barrels of oil per day - nearly as much as the current maximum output of Iraq.
