Oil prices ease after rising sharply a day earlier on Yukos production worries

LONDON ‹ Oil prices eased Thursday, a day after hitting a 21-year high in U.S. trading because of a threat by Russian authorities to shut down most of the production from that country's largest oil company.

Russia's Justice Ministry said Thursday it had lifted a freeze on the property of three subsidiaries of the Yukos oil company. Yukos had said those orders could shut off the production flow within days.

In London, contracts of Brent crude for September delivery traded at $38.97 in afternoon trading on the International Petroleum Exchange, down from Wednesday's high of $39.68 a barrel. That had beaten the previous all-time high of $39.65 on Oct. 12, 1990, when Iraqi troops invaded Kuwait.

September contracts of U.S. light crude spiked 3 percent higher on Wednesday to $43.05 a barrel on the New York Mercantile Exchange ‹ the highest level since the exchange began offering the light, sweet crude contract in 1983. Prices eased slightly later in the day to settle at $42.90.

The September oil contracts were down another 57 cents at $42.33 a barrel in morning trading in New York.

The market had reacted to developments in the battle between the Russian government and Yukos, the country's largest oil company.

Yukos, battered by a gigantic overdue back taxes bill, said it might have to halt its main production units within a few days because of a bailiffs' order.

The company says it does not have the cash to pay its tax debt, and court orders have frozen assets that it could tap to raise money. Yukos officials repeatedly have warned that the company, which produces 2 percent of the world's oil, is being driven toward bankruptcy.

Crude supplies are already extremely tight, with Iraq's output hampered by saboteurs and most producers already pumping as much as they can. Saudi Arabia, the only producer that still has significant spare capacity, has recently boosted its production by about 1 million barrels, but much of this fresh oil has yet to reach customers and replenish their depleted inventories.