SINGAPORE: World oil prices slipped yesterday but stayed close to 13-year peaks as Iraqi crude exports were reduced by sabotage to a pipeline and Kuwait tightened security at ports after warnings of possible attacks.

Weekend comments by some OPEC producers over a possible rise in official supply limits also helped dampen some of the bullish sentiment that last week saw oil prices hit the highest levels in 13 years.

US light crude eased 14 cents to US$39.79 a barrel, just 21 cents off the US$40 struck on Friday for the first time since October 1990, in the run up to the first Gulf War.

London's Brent crude slid two cents to US$36.98 a barrel.

Fears of disruptions to oil supplies from the Middle East, which pumps about one-third of global production, increased yesterday when official sources in Iraq said oil exports from the south of the country were disrupted after sabotage to a major pipeline feeding the Basra oil terminal.

Most of Iraq's 1.8 million barrels per day (bpd) of exports pass through the Basra terminal, which was the target of a foiled coordinated sea-borne suicide bombing attempt two weeks ago.

The US Army Corps of Engineers said southern crude exports were halted and a pipeline was still ablaze after the sabotage attack on Saturday.

Iraqi oil officials said exports were continuing but at a reduced rate of about 1.2 million bpd following the attack but they expected to return to normal at 1.6 million bpd by Wednesday.

Traders had feared an attack on oil infrastructure in the Middle East after the attempted bombing of the Basra oil terminal in late April and the shooting of foreign workers at a petrochemicals plant in Saudi Arabia a week later.

"There's probably a US$5 premium in the oil price at the moment because of worries of a terror strike," said David Thurtell, commodities strategist at Commonwealth Bank of Australia in Sydney.

Kuwait has beefed up security at six ports after US warnings to oil-rich Gulf states of possible sea-borne attacks by booby-trapped boats or jet-skis, an official at Kuwait's General Administration of Customs said on the weekend.

Thurtell said OPEC ministers had begun "softening the market up" for a reversal of the group's April production cut, which reduced the cartel's official production ceiling by one million bpd to 23.5 million bpd.

"If the damage (to Iraq pipeline) is bad and likely to last for weeks, OPEC will need to respond quickly by cranking up production, " said Thurtell.

The Organisation of the Petroleum Exporting Countries is due to review output policy in Beirut on June 3.

The United Arab Emirates said on Saturday that OPEC should raise production to cool oil prices and that the group was already taking action by pumping about two million bpd above official quotas.

Iran, the cartel's second-biggest exporter, said it would not oppose OPEC raising output limits by perhaps one million bpd at the June meeting.

OPEC decided to curb supplies in the second quarter to avoid any glut and price crash as winter demand traditionally ebbs but low gasoline supplies in the United States, strong Chinese demand and Middle East security fears have driven prices up to the highest levels in more than a decade.

(China Daily 05/11/2004 page9)