Iraq oil still at risk despite Zarqawi's killing: Analysts

The death of Iraq's Al Qaeda leader Abu Musab al-Zarqawi will not bring more security to the vital oil sector in the country, analysts say.

The death of Iraq's Al Qaeda leader Abu Musab al-Zarqawi will not bring more security to the vital oil sector in the country, where political instability and violence will continue to hamper exports and investment, analysts said.

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Oil prices fell more than a dollar after Iraq announced on Thursday that Abu Musab al-Zarqawi, whose group has claimed some of the bloodiest attacks in Iraq, had been killed.

Iraq's failure to return oil exports to pre-war levels, due to violence and mismanagement, has fuelled crude's price rally.

"The end of Zarqawi will not be the end of threats to oil exports in Iraq," said Mustafa Alani, an Iraqi expert at the Gulf Research Council in Dubai.

"Yes, Al Qaeda attacked oil installations but they were not the only actors and they were not the main actors," he said. "There is also a new factor -- political parties that are using threats against oil to gain leverage."

Insurgents in Iraq have waged a bloody campaign against US-led forces and the Iraqi government, repeatedly sabotaging oil infrastructure in the north to hamper efforts to boost crude oil exports, the main source of government revenue.

Iraq, which sits on the world's third largest oil reserves, has been struggling to produce 2 million barrels per day (bpd), down from nearly 3 million before the US-led invasion in 2003.

Its exports in May were around 1.5 million bpd, according to shipping sources.