Oil prices swing to close lower
news.mysanantonio.com By Elizabeth Allen Express-News Business Writer Web Posted : 03/21/2003 12:00 AM Oil prices fluctuated on the first day of the U.S. war on Iraq after dropping sharply on the eve of the conflict.
The price may drop further based on an optimistic view of a short conflict, industry experts said, but consumers aren't likely to see lower prices at the pump for some time.
"I don't think there's going to be any need for people to wait in line to buy gasoline any time soon," said Tod Bryant, spokesman for the Interstate Oil and Gas Compact Commission, a trade group that represents the major oil-producing states. "I expect prices to stay the same or go a little higher for the next couple of months."
Bryant noted the return of Venezuelan crude to the market after a general strike will help keep gas prices stable.
Thursday's crude price volatility was partly due to reports that some Iraqi wells were on fire in the southern part of the country, but reports of the damage have been mixed and most people are waiting to see if further sabotage occurs.
Crude oil for April delivery fell $1.27 to $28.61 a barrel on the New York Mercantile Exchange, the lowest level since Dec. 13, as the industry moves out of one waiting stage and into another.
"People are happy to see that something is happening and some of this uncertainty is being removed," said Jacques Rousseau of Virginia-based Friedman, Billings, Ramsey & Co.
"The next stage is, what will happen with these oil wells," he said, "and are they able to damage anybody else's oil production?"
Rousseau said it's too soon to predict whether gas prices would rise in the next few months, but he said he wouldn't be surprised if they go higher.
"Oil prices are OK now, but next week is it going to shoot back up because Iraqi fields are burning?" Rousseau said, adding that U.S. crude oil inventories are still very low.
Other analysts have noted that a lot of oil is in tankers headed for refiners, and that should help bring up the inventories.
In a worst-case scenario, the United States and other countries have strategic petroleum reserves, but Rousseau said it's difficult to predict what would cause the United States to tap its own, since that didn't happen during the Venezuelan strike.
OPEC officials have given assurances that they will not let the oil supply or price get too disrupted.
"They have essentially the control on the faucet," said Colm McDermott of energy research and consulting firm John S. Herold Inc. in Connecticut. "They are the swing producer that can make up for that shortfall."
The U.S. attack on Iraq is also well-timed to reduce its effect on the market, Rousseau said.
The second quarter is seasonally the weakest for crude oil demand, which drops by about 2 million barrels a day.
"Quite coincidentally, that's how much Iraq exports out onto the market," he said.
Iraq normally produces between 2.5 million and 3 million barrels of oil per day, about 3 percent of the 77 million barrels of the world's daily consumption.
The United Nations suspended the oil-for-food program that allowed companies to buy Iraqi oil earlier this week, although some Iraqi oil reportedly still is flowing through a pipeline to Turkey.
The companies that were buying through the program have been able to turn elsewhere, said Mary Rose Brown, spokeswoman for San Antonio-based refiner Valero Energy Corp., particularly since Venezuelan production has come back up after a strike.
"We buy crude everywhere — Mexico, Latin America, Canada, Venezuela," she said.
Valero had been a major buyer and became Iraq's biggest crude customer in January, importing 124,000 barrels per day, after Exxon Mobil and Chevron Texaco stopped buying from that country.
It remained a small part of the refiner's overall purchases, Brown said.
She also noted that "one of the companies that said they weren't going to buy from Iraq bought part of the last cargo from us," but declined to name the company.
eallen@express-news.net 03/21/2003