Crude Oil Prices Rise Moderately

www.timesdaily.com The Associated Press March 06. 2003 6:25PM

Crude oil futures rose moderately Thursday as traders braced for a potential war in Iraq. But trading was volatile, reflecting market uncertainty ahead of a news conference Thursday night by President Bush. The president is expected to be questioned extensively on the administration's plans for Iraq. The market is also awaiting a key report by U.N. weapons inspector Hans Blix. White House officials said they will decide after Blix's report to the Security Council on Friday whether to call for a vote on a resolution authorizing the use of force against Iraq. Blix's report is expected to be a mixed bag, praising Iraq for its destruction of Al Samoud missiles but also saying that gaps remain in Iraqi cooperation. Supporters and opponents of war are likely to seize on the report to press their case as the showdown over Iraq comes to a head. Russia, France and Germany say they won't allow passage of a war resolution, while the United States and Britain insist time is running out for Iraq. "Until they know that it's going to happen or it ain't going to happen, the market's going to be choppy," said Bill O'Grady, an analyst at A. G. Edwards. At the New York Mercantile Exchange, the front-month April crude oil futures contract rose 31 cents to $37 a barrel but failed to breach key technical resistance at $37.20 a barrel. The May crude contract posted large gains, ending up 58 cents at $35.54 a barrel. The session's key feature was the tightening of the April-May crude futures spread, trader said. The spread narrowed to $1.46 from $1.95 Wednesday. Analysts said the selling reflected easing short-term concerns about supplies and the likelihood that a war in Iraq could be delayed in the face of growing opposition. "There is a realization that that there may be a little bit of relief in the short term," said John Kilduff, senior vice president for risk management at Fimat Futures Inc. Kilduff noted that the Department of Energy predicted that U.S. crude oil inventories, now standing at a quarter-century low, are likely to grow by more than 8 million barrels in March. Historically low inventories have helped boost oil prices in recent months. Inventories have been drained by a two-month strike in Venezuela and a cold snap in the Northeast. O'Grady said the market's focus on May and other deferred contracts may "handicap a delayed war or a realization that the sunshine scenario of oil prices tanking after a war in Iraq may not happen." Many industry analysts believe that oil prices could fall sharply if a war goes well for the United States. But O'Grady said prices would drop only if Bush decides to release oil from the nation's Strategic Petroleum Reserve. He said the White House can engineer a sharp fall in oil prices by releasing 25 million to 30 million barrels of oil from the reserve. Energy Secretary Spencer Abraham said Wednesday the SPR should not be used to "address prices," noting that the reserve was built only for "severe supply disruption." Prices earlier took a boost from rumors that Iraq had bombed its own oil fields. But Iraq's ambassador to Russia dismissed the report, according to the BBC. Meanwhile, heating oil futures rallied late in the session, drawing support from persistent cold weather in the Northeast and a decline in inventories. April heating oil rose 1.17 cent to $1.0556 a gallon. April gasoline futures gained .51 cent to close at $1.1060 a gallon. On London's International Petroleum Exchange, the gains were bigger. April Brent futures jumped 53 cents to close at $33.53 a barrel. Natural gas for April delivery fell 17.7 cents to settle at $6.844 per 1,000 cubic feet.