Crude products drop sharply

www.helenair.com by The Associated Press

NEW YORK (AP) - Crude oil futures fell sharply Monday, weighed down by growing calls for continued inspections of Iraq's suspected weapons of mass destruction and signs of a breakdown in the strike in Venezuela.

On the New York Mercantile Exchange, nearby March crude oil dropped 99 cents to close at $32.29 a barrel, surrendering most of Friday's gains.

February heating oil shed 1.59 cent to close at 93.43 cents a gallon, while February gasoline was off 2.10 cents at 90.15 cents a gallon.

On London's International Petroleum Exchange, March crude fell 63 cents to close at $29.86 a barrel.

"I think the market is not looking for a Groundhog Day launch date," Tim Evans, an energy analyst at IFR Pegasus, said of a possible attack on Iraq. "I think the background concern is there, but the market is indicating a release of tensions regarding an attack on Iraq."

That release of tensions deepened as Chief U.N. weapons inspector Hans Blix delivered a mixed report to the Security Council that failed to provide an automatic trigger for action against Iraq, as many had speculated.

Blix said that while Iraq wasn't fully complying with disarmament demands, it was providing access to his team of inspectors now working in the country. On the question of how long inspectors need, Blix said he shared "the sense of urgency" to verify disarmament within "a reasonable period of time."

He didn't request more time, but Mohamed ElBaradei, the head of the U.N. nuclear agency, said the weapons search needed an extra few months.

Secretary of State Colin Powell said the inspectors' conclusion wasn't surprising and added that time is running out for Iraq. "We cannot allow the process of inspections to string us out forever," Powell said.

The State Department has reportedly begun drafting a second resolution calling for authorizing force against Iraq, Cable News Network reported.

But Powell said America will decide on the next step once he consults other members of the Security Council and President Bush has conferred with foreign leaders.

Nevertheless, there was a chorus of calls that inspectors should be given more time to complete their work. The calls came from Russia and China as well as traditional U.S. allies France, Germany and Canada.

"There wasn't enough to make the U.S. change its position, and there wasn't enough new information to make France or Russia or China or Germany or the rest of the world change their view of the situation," Evans said.

The oil market had anticipated that a U.S. attack could come as soon as early- to mid-February, said Tom Bentz, an analyst at BNP Paribas Futures in New York. But with growing calls for more inspections, that may be several weeks away, Bentz added. "It doesn't look like anything is going to happen immediately," Bentz said. "It's going to take time."

Meanwhile in Venezuela, there were signs that the general strike is crumbling, allowing oil production to recover from a sharp slump in December and January.

Output has risen to about 1 million barrels a day, according to dissident workers at state-owned Petroleos de Venezuela SA. A PdVSA spokesman said about 90 percent of workers at PdVSA have returned to work.

Before the strike, Venezuela produced about 3 million barrels a day of oil, sending about 2.5 million barrels a day to world markets, including 1.5 million barrels a day to the United States.

"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.