Oil Rises From 14-Week Low as Georgia Conflict Threatens Supply

By Gavin Evans

Aug. 11 (Bloomberg) -- Crude oil gained in New York on concern oil supplies from the Caspian Sea may be disrupted should the conflict in Georgia escalate.

Oil rose from a 14-week low as fighting in the central European state entered a fifth day. Russian jets fired more than 50 missiles at the BP Plc-operated Baku-Tblisi-Ceyhan oil pipeline south of the Georgian capital of Tbilisi, the Daily Telegraph reported yesterday. There were no visible signs of damage to the pipeline, the newspaper reported.

Crude oil for September delivery rose as much as $1.19, or 1 percent, to $116.39 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $116.25 at 8:15 a.m. in Sydney.

The contract fell $4.82, or 4 percent, to settle at $115.20 on Aug. 8, after a plunge in the euro reduced the investment appeal of commodities. Gold, copper and grains also fell as weaker growth prospects in Europe reduced the likelihood of rate increases there and delivered the dollar its biggest gain against the euro since September, 2001.

Oil prices fell last week, even as Russian troops entered the breakaway province of South Ossetia on Aug. 8 after fighting between local forces and the Georgian army.

Georgia, which has withdrawn its forces from Ossetia, is now under attack from warplanes and artillery fire from neighboring Abkhazia province.

The Baku-Tblisi-Ceyhan pipeline was shut Aug. 5 after a blast on part of the line in Turkey. The pipeline had been delivering about 800,000 barrels of oil a day to the Turkish port of Ceyhan before the shutdown, BP said last week.

Crude oil deliveries on the Baku-Supsa pipeline to Georgia's Black Sea coast are unchanged from last week, BP Plc said yesterday.

The euro fell for a fourth day, trading as low as $1.4911 in early Asian trading. It was last at $1.4958 from $1.5005 in late New York trading last week.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net