Early attempt to crack the $40-a-barrel mark
www.forbes.com Reuters, 02.27.03, 3:29 PM ET
NEW YORK (Reuters) - NYMEX crude oil futures tumbled Thursday as profit-taking set in after an early attempt to crack the $40-a-barrel mark failed.
Speculative funds led the sell-off in volatile trading, traders said, with the day's highs spurred by rising Iraq war fears and thin U.S. petroleum inventories.
NYMEX April crude fell 50 cents, or 1.3 percent, to settle at $37.20 a barrel.
April crude earlier soared $2.29 to $39.99, the highest level since October 1990 when NYMEX crude hit an all-time high of $41.15, just prior to the U.S.-led Gulf War to liberate Kuwait after an Iraqi invasion.
A suspected squeeze on the April contract intensified volatility, traders said.
"The market couldn't move past $40 and the sell-off began at that point... but remember $37 is still a very high price," said a NYMEX floor trader.
NYMEX prompt crude oil prices remain more than 50 percent higher from mid-November levels, a premium built in amid growing fears of a war in Iraq. A strike in major U.S. supplier Venezuela and a very cold winter have also propped up prices.
In London, April Brent crude settled 3 cents lower at $33.04 a barrel, moving $32.80 to $33.80.
A U.S. move to lower its terror threat level helped pare oil's move higher, traders said.
A delay until the weekend of the Turkish parliament's vote to allow the use of Turkish territory as a possible launchpad for military action against Baghdad was also bearish, they added.
The market remained nervous amid tough talk on Iraq by President Bush, who on Thursday said any Iraqi plan to destroy banned missiles was part of "a campaign of deception." He called for Baghdad to disarm completely.
"The discussion about these rockets is part of his campaign of deception," Bush said. "See, he'll say 'I'm not going to destroy the rockets, and then he'll have a change of mind this weekend and destroy the rockets and say, 'I've disarmed."'
U.N. arms inspectors said the al-Samoud 2 rockets violate the 93-mile (150-km) range limit imposed after the 1991 Gulf War and called for Iraq to start destroying them by March 1.
Bush's comments to White House reporters followed a speech on Wednesday in which he reiterated his intention to disarm Iraq, which the U.S. accuses of having weapons of mass destruction, with or without approval of the U.N. Security Council.
Earlier on Thursday, an Iraqi official said Iraq would respond to U.N. chief arms inspector Hans Blix's order that Baghdad destroy its al-Samoud missiles.
News that Iraqi Republican Guard troops and equipment were moving from their base in northern Iraq toward Baghdad raised concerns that Iraq was preparing for a U.S.-led attack.
A divided U.N. Security Council on Thursday discussed a U.S.-British-Spanish draft resolution that lays the groundwork for war.
France, Germany and Russia are pushing for more time for U.N. inspectors to search for Iraq's alleged weapons of mass destruction. No vote is expected for about two weeks.
Saudi Ambassador to Britain Turki al-Faisal told BBC radio his country would not back a U.S.-led war in Iraq if there is no new U.N. resolution explicitly permitting the use of force.
Meanwhile, OPEC Secretary-General Alvaro Silva said the cartel could cover any stoppage of Iraqi oil if war erupts and consumer countries need not release emergency reserves.
On Wednesday U.S. officials said Saudi Arabia had agreed to increase output by 1.5 million barrels per day if Iraqi oil flow is interrupted by war.
Temperatures across much of the United States and Canada are forecast to stay below normal through early March, Salomon Smith Barney meteorologists Jon Davis and Mark Russo said on Thursday.
Ahead of Friday's expiration for March refined products contracts, NYMEX March heating oil