Oil prices slide
www.heraldsun.news.com.au From correspondents in London 18mar03
OIL prices slumped today as traders took profits after the United States set the stage for a long-awaited war in Iraq that has sent prices skyrocketing in recent weeks.
In a classic "buy the rumour, sell the fact" response, prices fell after the United States, Britain and Spain dramatically withdrew their draft resolution seeking UN support for war on Iraq. US officials said President George W. Bush would give a final ultimatum to Iraqi President Saddam Hussein to leave Baghdad to avert war.
"People feel that war is now definite, and that has reduced the uncertainty over the issue," said GNI trader Paul Goodhew.
In another sign that war was looming, a spokesman for UN disarmament inspectors said the experts were likely to evacuate Iraq on Tuesday at the request of the White House.
The price of Brent North Sea crude oil for May delivery, the new benchmark contract, fell by 83 cents to $US29.30 per barrel in late deals when trading resumed after a period of disruption caused by anti-war protests.
New York's reference light sweet crude contract for April delivery lost 73 cents to $US34.65 per barrel in early trading.
But Commerzbank analyst David Thomas said that prices could bounce back when any bombs start falling on Iraq, until concerns about possible disruption to Iraqi and Kuwaiti oil supplies are assuaged.
Experts say that unlike in the 1991 Gulf war, prices may not fall so dramatically when the bullets start flying because oil stock levels in consumer countries are already very low.
"The possibility of a collapse is going to be much more muted than it was 12 years ago," said Thomas.
"The risk is certainly on the upside for oil prices now. When conflict actually starts, if it looks like being fairly quick then you'll see the price eroding quite rapidly," he said.
Analysts pointed towards higher temperatures arriving in major oil-consuming markets in the northern hemisphere and increased supplies from oil producers as factors likely to fuel a sharp price fall after any war.
"In the background is the realisation that demand is now coming into a much weaker period and supply is very, very high," said Barclays Capital analyst Kevin Norrish.
Crude production from the OPEC oil cartel soared 8.6 per cent or 2.217 million barrels a day in February to 27.88 million bpd, the Middle East Economic Survey (MEES) reported.
With Venezuela resuming output and a significant surge from Gulf states, output by the OPEC 10, without Iraq, climbed 10.1 per cent to 25.45 million bpd last month from 23.113 million bpd in January, the industry newsletter says.
The market is also counting on oil-consuming nations grouped under the umbrella of the International Energy Agency to release oil from their public crude reserves.
IEA executive director Claude Mandil said that the Paris-based grouping would set up a safety net to avert an oil shortage in the event of war against Iraq.
Countries belonging to the IEA held reserves of four billion barrels of oil or the equivalent of 115 days of consumption, which could be used if shortages arose, he said, adding that he did not expect to see such a shortage.