NYMEX oil down sharply on ACCESS as rally fades

www.forbes.com Reuters, 02.27.03, 6:04 PM ET

NEW YORK (Reuters) - NYMEX crude oil futures moved sharply lower in early overnight electronic trade on Thursday, extending a profit-taking spree on dayside trade after an attempt to crack the $40-a-barrel mark failed. At 5:45 p.m. (2245 GMT), NYMEX crude for April delivery delivery traded 56 cents lower at $36.64 a barrel. The ACCESS trading range stood at $36.52 to $37.22. On Thursday evening, a United Nations official in New York said that Iraq had agreed in principle to destroy its al-Samoud 2 missiles, but that U.N. arms inspectors must clarify the offer with officials in Baghdad. "They accept in principle the destruction of the missiles and the facilities but this has to be clarified," a U.N. official told Reuters. In regular dayside trade, the NYMEX April crude contract settled 50 cents lower. That followed volatile morning trading when April crude 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. Speculative funds led the sell-off, traders said, with the day's highs spurred by rising Iraq war fears and thin U.S. petroleum inventories. A suspected squeeze on the April contract intensified volatility, traders said. Before the day's sharp decline, NYMEX prompt crude oil had advanced nearly 60 percent from mid-November levels, a premium built on 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. A U.S. move to lower its terror threat level helped pare oil's move higher, traders said. 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. 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. 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. 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. In the early ACCESS trade and ahead of Friday's expiration for March refined products contracts, NYMEX March heating oil traded 0.78 cent lower at $1.1465 a gallon. In regular hours trading, it settled 0.06 cent lower at $1.1543. The April contract was down 0.82 cent at $1.0519, after ending dayside trade 0.58 cent off at $1.0601. NYMEX March gasoline traded 1.05 cents down at $1.0075 a gallon. It ended dayside trade 0.03 cent lower at $1.018. April gasoline was down 1.13 cents at $1.0825 a gallon, after finished up 0.27 cent at $1.0938 in regular hours trading.