NYMEX oil falls further, IEA ponders reserve release

www.forbes.com Reuters, 01.10.03, 11:01 AM ET

NEW YORK, Jan 10 (Reuters) - NYMEX crude oil futures fell further Friday morning after the West's energy watchdog said it would consider releasing members' petroleum reserves if supplies were cut from both Iraq and Venezuela.

At 10:40 a.m. EST (1540 GMT), NYMEX February crude was down 54 cents at $31.45 a barrel, extending the morning low to $31.35.

The contract rallied nearly 5 percent on Thursday on renewed fears over a possible war with Iraq. U.N. arms inspectors presented an interim report showing they saw gaps in Iraq's arms declaration but as yet have found no 'smoking guns" in their search efforts.

In London, the February Brent crude contract was 34 cents lower at $29.30 a barrel.

The Paris-based International Energy Agency (IEA) said Friday that if supplies from both Iraq and Venezuela were cut, its member industrial nations would consider the emergency release of petroleum reserves.

The group also said it would not wait for a war in Iraq, the possibility of which has been looming large as U.N. arms inspectors search for banned weapons in that nation, before discussing a possible release of oil reserves.

The IEA board will meet next Friday to start determining whether to release reserves. The decision depends on OPEC's surplus and market fundamentals.

The IEA, with 26 members from industrialized nations, is an autonomous agency linked with the Organization for Economic Cooperation and Development (OECD).

The day's losses followed weakness overnight prompted by comments from British Prime Minister Tony Blair, who appeared to push back the deadline for a decision on military action against Iraq.

Blair told his cabinet that a Jan 27 formal progress report on inspections in Iraq should not be regarded as a deadline for a decision on military action.

U.S. Secretary of State Colin Powell also tried to deflect attention from Jan 27. "It is not necessarily a D-day for decision-making," Powell told the Washington Post.

Meanwhile, oil markets have to wait for the decision of an emergency meeting of the Organization of Petroleum Exporting Countries on Sunday to see if it agrees to boost output to help cover deep supply losses from the 40-day-old Venezuelan strike. The Latin American OPEC member is the fifth largest exporter of crude in the world.

OPEC officials have indicated the group is considering raising output by about 1.0 million to 1.5 million barrels per day.

NYMEX February heating oil was down 1.35 cents at 86.15 cents a gallon, moving 85.80 to 87.25 cents.

NYMEX February gasoline was 1.10 cents lower at 86.40 cents a gallon, trading 87.00 to 88.60 cents.