Sudan Says Thaw In Relations May Prevent South Sudan Oil Halt

South Sudan depends almost entirely on oil exports for its government budget and diplomats fear a shutdown could undermine its stability.

A pipeline closure would also hurt Sudan's economy which needs South Sudan's payments of oil transit fees. Its currency fell last week to a record low against the dollar on the unofficial market after South Sudan itself reduced oil flows because of the festering dispute.

Nicodemus Ajak Bior, an oil ministry official in Juba, said South Sudan had ended its own gradual shutdown and was pumping around 160,000 barrels per day, a level still below the roughly 200,000 bpd it was producing before Sudan's closure threat.

South Sudan's foreign minister designate, Barnaba Marial Benjamin, again rejected Khartoum's accusations but said the two sides were still talking.

"We will remain in communication and dialogue with Khartoum."

Apart from oil, the neighbours have yet to decide on the ownership of Abyei and other disputed territories along their shared border.

(Additional reporting by Edmund Blair in Nairobi and Andrew Green in Juba; writing by Richard Lough; editing by Drazen Jorgic and James Jukwey)