Oil edged down on Monday after signs of improved Iraqi production, but held near $71 a barrel as US gasoline demand is still growing despite near-record prices while traders worry over supply disruptions.
US crude traded 9 cents down at $70.78 a barrel, after a rise of three cents on Friday that took gains for last week to 1.4 percent. Iraq's oil minister, Hussein al-Christina, offered an optimistic forecast for the country's industry on Sunday, saying daily output has reached 2.5 million barrels a day and that Iraq hoped to rival top exporter Saudi Arabia within a decade.
Iraq issued a tender for 6 million barrels of Kirk crude on Sunday, the second tender this month after a halt of nearly a year in exports from its northern oilfields due to sabotage. Concerns remain over US fuel supplies during peak summer demand, after the US Coast Guard said on Friday a closure of a key shipping channel in Louisiana was extended after heavy rains caused an oil spill, supporting gasoline prices as the channel connects three refineries with the Gulf of Mexico.
Data last week showed US drivers are buying more motor fuel than last year, despite paying almost $3 a gallon at the pump, while gasoline stocks rose less than expected. "Previously inventories looked very comfortable now a big swing lower is in sympathy with other worries for the oil market, like Iran and Nigeria," said Tobin Gorey of the Commonwealth bank of Australia.
Iran on Sunday repeated threats that it was ready to use its massive oil exports as a weapon to defend it if it felt in danger in an international dispute over its atomic programme. But Oil Minister Kazem Vaziri-Hamaneh said international sanctions on 2.5 million barrels per day of Iranian crude exports would be impractical and would send oil prices over $100 a barrel.
Adjusted for inflation, oil is at its most expensive since 1980, the year after the Iranian revolution. It is within sight of its $75.35 record high hit in April. Opec crude output edged 300,000 barrels per day higher in June to 29.7 million bpd because of increases in the group's two biggest producers, Saudi Arabia and Iran, oil consultant Petrologistics told Reuters on Friday.
The exporter group has kept its official output ceiling, which binds the 10 members excluding Iraq, at a near-maximum 28 million bpd for almost a year in response to a rally that has taken oil from $20 at the start of 2002.
In Opec member Nigeria, where a quarter of output has been crippled by militant attacks, kidnappers freed two Filipino oil workers on Sunday.
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