NYMEX April crude fell 45 cents
www.forbes.com Reuters, 03.17.03, 3:39 PM ET (Recasts, updates with settlement prices)
NEW YORK (Reuters) - NYMEX crude oil futures pared steep losses but still ended sharply lower Monday for a third session in a row as traders speculated that any U.S.-led war with Iraq would be short.
The likelihood that the United States will act quickly to release oil from its strategic reserves to offset any supply shortage from the Gulf region also helped pull down prices.
In volatile trading, NYMEX April crude fell 45 cents, or 1.3 percent, to settle at $34.93 a barrel, extending losses in the past three sessions to $2.90, or 7.7 percent.
In a roller-coaster day, the contract moved in a wide $2.35 range, shooting up to $36.35 and then quickly diving to $34.00.
"The market psychology has palpably changed and the urgency to buy has disappeared," said Peter Beutel, president of oil trading consultancy Cameron Hanover in New Canaan, Connecticut.
In London, Brent crude's new prompt month May shed 65 cents, or 2.1 percent, to settle at $29.48 a barrel.
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.
France, which led opposition in the U.N. Security Council to a U.S.-British-Spanish resolution that would authorize war on Iraq after a final chance to disarm, said the move was not justified. Russia, also opposed to the resolution, said any resort to force would be a mistake and a violation of international law.
U.N. Secretary General Kofi Annan has ordered the pullout of U.N. staff from Iraq and said 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.
The day's events followed an ultimatum from Bush on Sunday that the U.N. Security Council had just one more day to give its blessing to the proposed Iraq resolution.
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 (0100 GMT Tuesday) in which he is expected to make a final ultimatum to Iraqi President Saddam Hussein to leave or face invasion.
Iraq rejected the U.S. ultimatum on Monday afternoon.
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 of Louisiana, the Republican chairman of the House Energy and Commerce Committee, said earlier that the reserves had been switched to "flow mode" and were prepared to be put in the market if ordered by Bush.
Iraq exports about 1.7 million barrels per day (bpd) of crude under U.N. supervision as part of sanctions in place following Iraq's invasion of 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 traders now expected imminently.
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, or 13 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 risen more than $15, or 60 percent, about half of which was seen as a war premium on fears a war would cut off Iraq supplies.
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