South Sudan rebels seize capital of oil-producing state

South Sudanese rebels said they had seized control of the capital of oil-producing Upper Nile state on Tuesday, an assault that the government said breaches a ceasefire signed last month and casts doubt over planned peace talks in neighboring Ethiopia.

The rebel strike on the city of Malakal — located 400 miles north of the South Sudan capital Juba — was the first attack on a major town since the Jan. 23 ceasefire deal, which both sides repeatedly accused each other of violating.

The attacks started early Tuesday morning and intensive fighting continued in Malakal for several hours, Al Jazeera's Hoda Abdel-Hamid reported.

The government denied that the rebels now controlled Malakal, which lies on the fringes of a key oil-producing area in Upper Nile state. Malakal has changed hands several times in two months of fighting in the country, triggered by a power struggle between South Sudan President Salva Kiir and his former deputy Reik Machar, who was sacked in July. 

Grace Cahill, a spokeswoman for Oxfam in South Sudan, told the Associated Press that armed groups had gathered outside the U.N. compound in Malakal, where 27,000 people have been seeking shelter.

"The presence of armed groups outside the compound has made those inside very scared," she said.

Meanwhile, the clashes are expected to fuel concerns over the security of South Sudan's northern oil fields — an economic lifeline for the country and neighboring Sudan, which receives a fee from the south for crude piped across its territory to the coast for export.

Malakal lies about 90 miles from Paloch, an oil complex where a key crude oil processing facility is situated. South Sudan said it has already been forced to cut oil production by a fifth, to 200,000 barrels per day, all of which is pumped from Upper Nile. Rebel control of Malakal could raise concerns over its ability to maintain the rate of output.

"All the oil from the fields around Upper Nile is pumped to Paloch," Jacob Jok Dut, director of the Centre for Democracy and International Analysis, told Reuters. "If Malakal comes under rebel control, then definitely there will be tension in and around Upper Nile."

Oil accounts for 98 percent of government revenues. Oil firms in South Sudan, a country the size of France, include China National Petroleum Corp, India's ONGC Videsh and Malaysia's Petronas. Work in some fields has been suspended.

Thousands of people have been killed and more than 800,000 have fled their homes since fighting began two months ago. 

Peace talks had been due to resume last week, but were held up by a rebel demand that four remaining political prisoners in government custody be released and the Ugandan military, which is supporting Kiir's army, withdraw from South Sudan. 

Ugandan Foreign Minister Sam Kutesa said Tuesday that Uganda will not withdraw its troops from South Sudan until the African Union deploys a planned "standby force" in the country. The African Union says such a force would have the capacity to respond rapidly to outbreaks of violence across the continent, but it may take months — even years — to realize this plan.

The U.N. says both sides of the conflict have committed rights violations in fighting that was often ethnically charged.

Machar is Nuer, the ethnic group of most of the soldiers who defected and joined his rebellion late last year. Most of the loyalist forces are from the Dinka ethnic group of President Kiir, whose government insists that unrest in the country was sparked by a failed military coup mounted by soldiers loyal to Machar.

Machar denies the coup allegation but says his goal is to have Kiir removed from power. 

Al Jazeera and wire services