Oil prices fall in New York

news.bbc.co.uk Tuesday, 28 January, 2003, 07:00 GMT

Venezuela's general strike has led to a drop in oil production

Oil prices fell in New York on Monday as UN secretary general Kofi Annan asked for more time for UN weapons inspectors to finish their job in Iraq.

In New York, crude oil prices fell 3% after UN chief weapons inspector Hans Blix offered little evidence that Iraq was hiding banned weapons.

March contracts for light sweet crude, the US standard, closed 99 cents lower at $32.29 a barrel, down about $3 from the 26-month high of $35.20 reached last week on fears a war with Iraq was imminent.

But in electronic trade on Tuesday, light sweet crude gained over 1%, up to $33.66 a barrel after a media report that the US was ready to attack Iraq in February.

I think the market is not looking for a Groundhog Day launch date

Tim Evans, energy analyst at IFR Pegasus

In London on Monday, March Brent crude oil fell 63 cents at $29.86.

Groundhog Day

Global stock markets reacted to Mr Blix' speech with sharp downfalls on Monday, but the oil market seemed to be taking a different view on the impact of his findings.

"I think the market is not looking for a Groundhog Day launch date", said Tim Evans, an energy analyst at IFR Pegasus.

"I think the background concern is there, but the market is indicating a release of tensions regarding an attack on Iraq."

Venezuela

Apart from Mr Blix' speech, news that a crippling 57-day-old strike in Venezuela, the world's fifth largest petroleum exporter, could ease also weighed on oil prices.

On Monday, opposition leaders said schools, restaurants and malls may reopen but the strike in the oil industry would go on in spite of efforts to restart production.

The strike has led to a sharp drop in Venezuelan oil production in December and January.

"It's going to take a while to get exports back to full capacity, but there are signs that the worst is behind us", said Ed Silliere, an analyst at Energy Merchant in New York.

Hans Blix

Hans Blix reported to the UN Security Council on Monday after two months of inspections.

He said there were gaps in information that Iraq should have delivered by now, although he could not conclude Baghdad possessed prohibited weapons.

Oil prices are still up almost a third from mid-November on concerns that hostilities in Iraq could upset oil supplies from the Middle East while production in Venezuela is crippled.

An icy Arctic wind sweeping across the eastern United States over the past two weeks has also boosted prices by lifting heating demand.