Oil prices plunge on hopes of quick war, no shortages

www.floridatoday.com Mar 18, 9:44 PM Associated Press

NEW YORK -- The price of oil plunged 9 percent Tuesday, falling to its lowest level in more than two months. Traders bet that the impending United States invasion of Iraq will go smoothly and that global stockpiles of crude are sufficient to offset any supply disruptions.

The April futures contract fell $3.26 to $31.67 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 8.

However, with U.S. supplies low and uncertainty in the Middle East high, traders said petroleum prices likely will remain volatile in the short term.

"This thing could go right back up," said Tom Bentz, an analyst at BNP Paribas in New York. "We're still vulnerable because inventories are tight."

The most-recent Energy Department data showed commercial stockpiles of crude at269.8 million barrels, 18 percent below year ago levels.

Supplies have dwindled as a result of high demand for heating oil in the Northeast and fewer imports from Venezuela, whose oil industry was crippled for months by a nationwide strike.

Yet Bentz and other traders mostly expressed confidence Tuesday that the loss of Iraqi crude could be made up elsewhere and that the U.S. government will tap its own 600 million barrel stockpile, the Strategic Petroleum Reserve, in the event of a supply emergency. European nations have their own stockpiles that could help make up for any supply shortages resulting from war, which could begin as early as tonight.

Furthermore, industry-watchers said Organization of Petroleum Exporting Countries producers -- except Iraq and Venezuela -- all are pumping over their quotas, eager to take advantage of the high prices.