NYMEX oil down sharply on SPR talk, Iraq war eyed
www.forbes.com Reuters, 03.17.03, 1:09 PM ET
NEW YORK (Reuters) - NYMEX crude oil futures were sharply lower at midday on Monday as traders speculated that a looming war with Iraq would be short.
Traders also believed U.S. could offset any supply shortage from the Gulf region by releasing oil from its strategic reserves, which helped pull down prices.
At 12:55 p.m. EST (1755 GMT), NYMEX April April crude was down 93 cents at $34.45. Nearby May was down $1.01 at $32.30 and June down $1.06 at $30.90.
NYMEX April crude oil surged as much as $1.02 higher to $36.40 in volatile trading and then quickly nose-dived as low as $1.38 to $34.00.
"It appears very likely that the attack on Iraq will begin late in the week or shortly after...the advice for U.N. inspectors to get out was a serious signal that the time is nigh," said an energy market analyst from Houston.
In London, Brent crude's new prompt month May was down 88 cents at $29.25.
The United States, Britain and Spain ended Monday morning diplomatic efforts to win U.N. approval for an ultimatum to Iraq to disarm or face war. That, analysts said, now clears the way for the three countries to launch a war without a vote in the Security Council.
U.N. Secretary General Kofi Annan told the U.N. Security Council that he is now pulling U.N. staff out of Iraq and that all U.N. work in the country, including the oil-for-food program, would be suspended.
U.N. arms inspectors were packing their bags and were expected to leave Baghdad early Tuesday, a diplomat in Baghdad told Reuters.
The impetus to remove inspectors followed an ultimatum from Bush on Sunday that the U.N. Security Council had just one more day to give its blessing to a resolution sanctioning the use of force to rid Iraq of suspected weapons of mass destruction.
The U.S. has vowed to lead a coalition to disarm Saddam, who it accuses of violating U.N. disarmament resolutions, with or without U.N. support. More than 250,000 American and British troops are already poised to attack if the signal is given.
Bush will deliver a television message at 8:00 p.m. EST, in which he is expected to make a final ultimatum to Iraqi President Saddam Hussein to leave or face invasion.
The U.S. has yet to decide whether it would tap its 600-million-barrel Strategic Petroleum Reserve to stabilize domestic supply once Iraqi oil exports stop flowing, the U.S. Department of Energy said.
U.S. Rep. Bill Tauzin from Louisiana, the Republican chairman of the House Energy and Commerce Committee, said earlier that the reserves had been switched to "flow mode" and was prepared to be put in the market if ordered by Bush.
Iraq currently exports about 1.7 million barrels per day (bpd) of crude under U.N. supervision as part of sanctions when it invaded Kuwait in 1990. Last January, Iraq sold about 600,000 bpd to the United States.
On Monday, the U.N.-supervised Iraqi oil exports were at a standstill and will likely stay that way until after a U.S.-led assault, which is now expected imminently, trade and U.N. sources said.
Iraq's oil exports will be halted indefinitely once U.N. oil export inspectors are evacuated, which is expected to coincide with the pullout of U.N. arms inspectors by Tuesday.
Saddam said early Monday that while Iraq had weapons of mass destruction in the past, it no longer had them.
The day's prices have erased about $5.50, or nearly 14 percent, since NYMEX crude hit a 12-year high of $39.99 on Feb. 27. From mid-November to that high point, NYMEX crude prices had built up more than $15, or 60 percent, about half of which was seen as a war premium amid fears of supply disruptions that a war with Iraq would entail.
Crude prices also rose as U.S. supplies thinned due to a crippling two-month strike in Venezuela backed by its oil workers that began Dec. 2. Venezuela's production is gradually being restored.
Crude futures jumped to an all time high of $41.15 in October 1990 after Iraq invaded Kuwait in August of that year.
Meanwhile, NYMEX refined product futures tumbled sharply, moving with crude.
April gasoline futures