Front month crude oil futures on the New York Mercantile Exchange scrambled to yet another record high Aug 19 after reports that Iraqi militants had threatened to torch Iraqi oil wells spooked a market already jittery over security of supply. Benchmark October Brent futures hit an intra-day high of $43.80/bbl in afternoon trade, up 77 cents on the day, approaching the all-time high of $44.11/bbl traded last week. New York light sweet crude oil futures led the latest rally with prices breaking above $48/bbl. "Iraq is the main headline. We're also seeing some last minute short covering in the September WTI contract ahead of the expiry Friday," an IPE Brent dealer said. Further threats to oil infrastructure in southern Iraq helped to push prices higher after an aide to Moqtada Sadr told Qatar-based Al-Jazeera television Aug 19 that residents of southern Iraq have set oil pipelines on fire and threatened to torch oil wells across Iraq.

Assurances by Iraq's interim government that it had devised a plan to protect the country's oil infrastructure appeared to fall on deaf ears as traders focused more on the continuing in the holy city of Najaf between US forces and militiamen loyal to Shi'ite Muslim radical leader Moqtada Sadr. NYMEX front-month crude oil futures hit $48/bbl for the first time Aug 19 as supply concerns seemed to intensify ahead of the Aug 20 contract expiration, suggesting traders were nervous about having to make a delivery. September crude jumped 93 cts to post

"I think OPEC has already done more than market expectations." — Iran's OPEC governor Hossein Kazempour Ardebili

an all-time high settlement of $48.20/bbl. The backwardation in the front of the curve -- where prompt prices are higher than forward months -- continued to steepen in a symptom of a tight market, moving out to plus $1.10 after settling at plus 49 cts just two days ago. Commercials or oil companies were absent from the market as they held back from selling physical oil while prices were still on an upward trend with no top in sight, trading sources said.

The main driver appeared to be Iraq, where exports are still running at 50% of capacity, and where the continued turmoil suggested a return to normality would be delayed. Iraq's Persian Gulf Basra and Khor al-Amaya terminals have estimated loading delays of about five to six days as restricted flow rates continue to hamper exports of Iraqi crude, port agents said Aug 19. Currently, four VLCCs and one smaller tanker are delayed at the Basra and Khor al-Amaya terminals, port agents said. In total, the delayed tankers are due to lift 8.7-mil bbl from the two terminals. Iraqi insurgents shifted their focus to the country's southern oilfields after militants disabled the northern export pipeline through repeated acts of sabotage since the end of the US-led war against Iraq last April. Sadr has threatened to disrupt Iraqi oil exports unless US forces leave immediately. "After the declarations of the so-called Iraqi minister of state, in the name of his unjust government ... residents of southern Iraq, mainly in Basra and Amarah, have bombed several pipelines and are threatening to torch all the oil wells in the south," said Sheikh Aws al-Khafagi, head of the Sadr office in the southern city of Nasiriyah.

Minister of State Kassem Daoud said earlier Aug 19 that an offensive against Shiite rebels in Najaf would be launched within hours unless Sadr disarmed. Interim Prime Minister Iyad Allawi, at a press conference in Baghdad, parts of which were broadcast on CNN, acknowledged there had been recent attacks on Iraq's southern oil infrastructure, including at the Halfaya oilfield in the eastern part of the country. But he expressed hope the new security plan, details of which he did not divulge, would be executed right away and prevent further damage to oil infrastructure. Iraq was exporting an average of 1.6-mil b/d from its southern ports before the latest disruption, leading to fears that other OPEC producers cannot make up the shortfall if Iraqi oil were to disappear from markets. Bar Saudi Arabia and the UAE, the remaining eight OPEC members bound by quotas are pumping close to their full capacity and feeding market perceptions that the market is vulnerable to a supply shortage.