(Adds Iraqi pipeline, updates prices)
By Felicia Loo
SINGAPORE, March 28 (Reuters) - Oil fell towards $106 a
barrel on Friday as traders wary over the U.S. economic outlook
took profits from a three-day rally and were cheered by news
that Iraq's oil pipeline system was back at near normal levels.
U.S. crude <CLc1> dropped 67 cents or 0.6 percent to
$106.91 a barrel by 0616 GMT, after earlier falling as low as
$106.29 a barrel.
On Thursday, saboteurs blew up a pipeline in southern Iraq,
cutting exports by 300,000 barrels per day (bpd), helping lift
crude to a $$1.68 gain in New York.
But on Friday, a senior Iraqi oil official said Iraq's
southern oil pipeline system was back at near normal levels to
its Basra export terminal after the two main pipelines were
left undamaged during Thursday's attack. []
Despite Friday's declines, prices are still up 5 percent on
the week, near their mid-March record high of $111.80, amid a
broad fund-led rally in commodities markets aided by a weak
U.S. dollar and news of an unexpectedly deep decline in weekly
U.S. fuel stocks.
"People are taking a wait-and-see approach on Iraq and have
moved into profit taking as demand is at its lowest during the
second quarter. There are concerns over the U.S. economy," said
Robert Nunan of Mitsubishi Corp in Tokyo.
A shipping source at Iraq's Basra export terminal said the
pipeline attack cut flows on the line to around 1.2 million
barrels per day, down 300,000 bpd from average levels.
Analysts said the attack -- the first disruption to
shipments from Iraq's south since 2004 -- could prompt traders
to attach a bigger "fear premium" to prices, as it raised the
risk to previously stable supplies.
But economic troubles in the U.S. weighed on oil prices.
The U.S. economy could be slipping into recession, said
Dennis Lockhart, president of the Atlanta Fed on Thursday,
after government data confirmed anaemic growth in the fourth
quarter, which analysts say has since slowed further.
[]
Boston Fed President Eric Rosengren told reporters in Seoul
on Friday the current period of slow growth would likely lead
to an increase in unemployment. []
Thursday's crude oil gains were led by heating oil <HOc1>,
which surged more than 3 percent, underpinned in part by news
of a brief outage at South Korea's S-Oil refinery, which forced
it to cancel diesel supply contracts for April.
April heating oil retraced gains on Friday, falling by 1.93
cents to $3.1290 a gallon by 0228 GMT.
In the United States, where refiners last week slowed
operations to their slowest pace since 2005, some plants were
beginning to return from maintenance ahead of the summer.
ConocoPhillips plans to restart its 44,000-bpd Santa Maria
refinery in Arroyo Grande, California, on Thursday after a
power failure shut the plant.
Valero Energy Corp was restarting several units, including
the coker and the hydrocracker, at its 230,000-bpd refinery in
Port Arthur, Texas, after a brief power outage.
(Additional reporting by Annika Breidthardt; Editing by Ben
Tan)
