NYMEX Oil Cuts Losses on Oil Field News

reuters.com Mon March 10, 2003 01:13 PM ET

NEW YORK (Reuters) - NYMEX crude oil futures trimmed losses midday on Monday on news that Baghdad has placed explosives at oil fields in northern Iraq to prevent them from being taken over if the U.S. attacks, traders said.

The market earlier retreated as the United States faced an uphill battle to gain support for a new U.N. resolution authorizing war against Iraq.

At 12:45 EST, NYMEX April crude CLJ3 traded 18 cents lower at $37.60 a barrel, as it traded in a tight range from $37.30 to $37.75.

"The news of the explosives placed in Iraq oil fields is taking us further away from the day's lows," said a NYMEX floor trader.

Iraq has placed explosives at the Kirkuk oil fields in northern Iraq so they won't come under U.S. control in the event of a U.S. invasion, a U.S. official told Reuters on Monday, adding the Iraqi action took place "recently."

Traders were also watching OPEC, ahead of a formal meeting on Tuesday in Vienna, as the group was split over plans to suspend output limits should the U.S. strike Iraq.

News that Venezuela's refined oil products output could return to full capacity "within 10 days" according to Energy Minister Rafael Ramirez, also factored into the day's prices, they said.

"Taken together the early news in the oil front today was bearish, but the war could dislodge a significantly large amount of Iraqi barrels... and it is uncertain whether OPEC can fill that up," said a NYMEX floor trader.

An early Monday comment from U.S. Energy Secretary Abraham Spencer that the U.S. would act "instantaneously" to release oil from strategic reserves, if national supplies were threatened, had been digested, traders said.

"In any case, Abraham said any decision to release would only made in case of 'severe disruption' in supply, which repeats his position from last week," one trader said.

Despite a new Russian veto threat, President Bush worked the phones to foreign leaders on Monday in an effort to win support in the U.N. Security Council for a resolution authorizing war against Iraq. A vote could come as early as Tuesday.

Bush needs nine votes out of the 15-member U.N. Security Council to win support for the resolution that would give Iraq a final deadline of March 17 to disarm or face military action.

But veto-holders France, Russia and China have said they want more U.N. arms inspections, rather than war at this time.

Britain said on Monday it may modify the draft resolution in an attempt to gain a critical mass of support on the council. Prime Minister Tony Blair's official spokesman suggested that the deadline set in an amended resolution could be moved, although not by much.

The United States and Britain have amassed about 300,000 troops in the Gulf, along with dozens of warships and nearly 600 strike aircraft, in preparation for an attack.

In Vienna, Gulf OPEC powers Saudi Arabia and Kuwait are hoping to get backing at Tuesday's meeting to set aside production quotas if war stops Iraqi exports, currently at about 1.7 million barrels per day (bpd).

Iran said it opposed a bid by Western-friendly OPEC states for a policy that Tehran says implies support for a U.S. attack, by controlling oil prices.

NYMEX April heating oil HOJ3 was up 1.25 cents at $1.1210 a gallon, trading $1.0930 to $1.130.

Temperatures in the heating oil-dependent U.S. Northeast will be 8-15 degrees below normal on Monday, gradually working to 2-4 degrees below normal by Friday, private forecaster Meteorlogix said. It said readings in the next six to 10 days after that would be near normal.

NYMEX April gasoline HUH3 traded 0.92 cent lower at $1.1475 a gallon, moving $1.1270 to $1.1550.