Crude markets continue downturn

www.upi.com By Hil Anderson UPI Chief Energy Correspondent From the National Desk Published 3/21/2003 7:13 PM

LOS ANGELES, March 21 (UPI) -- Oil prices continued in a virtual freefall, dropping more than $1 per barrel on the New York Mercantile Exchange in unusually bearish trading for a Friday when the vital Persian Gulf was at war as American and British forces rolled through the southern oilfields of Iraq.

NYMEX had been expected to test downward resistance at $27 per barrel and did just that, closing at $26.91, down $1.21 on the day and nearly $9 below the end of last week. Heating oil and gasoline both dipped around 6 cents per gallon.

Traders generally tend to buy up oil on Fridays during times of uncertainty so as not to be caught short if the situation deteriorates and prices soar over the weekend. The past week, however, has been primarily bearish with the market looking ahead to a quick end to the campaign and the erasure of the "war premium" that has tacked around $4 to the price of a barrel of crude and has sent gasoline prices sky-high at the pump.

World wartime oil production this week was only slightly below what it had been last November, Energy Secretary Spencer Abraham said Friday in his latest announcement aimed at reassuring nervous energy markets and consumers.

Abraham said that OPEC production as of Thursday was 26.5 million barrels per day, less than a half-million barrels below output levels seen last November.

"This is despite losing all production from Iraq and also incurring other production losses from Venezuela and Nigeria," Abraham pointed out. "Working with International Energy Agency partners, we continue to monitor global oil market conditions. We appreciate the continued commitment by oil producing countries to ensure stability in the world oil markets."

On the military front, U.S. and British forces secured the southern port of Umm Qasar and were reportedly pressuring the larger oil city of Basra. The Basra, Umm Qasar and the nearby tanker terminal at Mina al-Bakar will give the allies control of Iraq's deep-water harbors on the Persian Gulf.

Umm Qasar is located downriver from Basra and the southern oilfields that allied troops moved into on Friday. Although said to be in a state of disrepair, Umm Qasar was nevertheless functional up until the start of the war and could be ramped up in order to handle both supplies for post-war reconstruction and oil exports that will help pay for the task. Mina al-Bakar was heavily damaged in the first Gulf War but was one of the few oil facilities Saddam Hussein's regime repaired in the subsequent years and is the only Iraqi port on the Persian Gulf capable of accommodating larger oceangoing tankers.