Oil futures approach $108 on Iraq pipeline concerns

New York: Oil futures shot to nearly $108 a barrel yesterday as concerns about Iraqi oil output stole investors' attention from the dollar, which stabilised against the euro.

Insurgents bombed a key Iraqi oil pipeline yesterday morning. Iraqi oil officials said the attack and ongoing clashes in Basra would not affect oil exports, but Dow Jones Newswires later reported that exports from southern Iraqi terminals have been cut to about 1.2 million barrels a day from a normal rate of 1.56 million barrels a day.

Light, sweet crude for May delivery rose $1.40 to $107.30 a barrel on the New York Mercantile Exchange after earlier rising as high as $107.70.

The news from Iraq added to supply concerns stoked Wednesday when the government reported that domestic crude oil inventories were mostly unchanged last week, while fuel supplies fell more than expected.

Analysts said prices jumped much less on the Iraq news than they would have if the dollar had been declining.

"The reaction so far in the futures markets has been relatively muted," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

The supply concerns temporarily drew invest-ors' attention from the dollar, which rose slightly against the euro, reversing a trend that send oil futures surging nearly $5 on Wednesday.

A stronger dollar makes hard assets such as energy commodities less attractive as a hedge against inflation than when the greenback is falling. Exacerbating the impact of foreign exchange moves, oil futures are priced in dollars, making them more expensive to investors overseas when the greenback rises.

In other Nymex trading yesterday, April heating oil futures rose by 5.72 cents to $3.101 a gallon, while April gasoline futures slid by 3.84 cents to $2.7045 a gallon.

April natural gas futures fell by 9.4 cents to $9.478 per 1,000 cubic feet.

The US Energy Department, in its weekly inventory report yesterday, said natural gas supplies fell last week by 36 billion cubic feet, less than analysts surveyed by Dow Jones Newswires had expected.

In London, Brent crude went up 99 cents to $104.98 a barrel on the ICE Futures exchange.