NYMEX oil drops as U.S. begins air war against Iraq
www.forbes.com Reuters, 03.21.03, 1:14 PM ET
NEW YORK, March 21 (Reuters) - NYMEX crude oil futures slumped to their lowest level in nearly four months midday on Friday as the United States launched a major air war against Iraq and U.S. and British ground forces penetrated deep into Iraqi territory.
An early impetus to the day's price decline, the seventh in a row, was news that U.S. and British forces had seized control of key oil producing areas in southern Iraq, increasing prospects of a shorter interruption of Iraqi oil exports.
News midday that Royal Dutch/Shell <RD.AS> <SHEL.L> had declared force majeure for up to 14 days on up to one million barrels per day (bpd) of Nigerian crude oil exports due to ethnic violence limited the midday slippage, traders said.
NYMEX May crude, the new front month, fell as much as $1.77 or 6.3 percent to $26.30 a barrel, the lowest since November 26.
In London, May crude was down $1.35 or 5.5 percent at $24.15 a barrel, moving down with NYMEX crude.
A U.S. official, who asked not to be named, said the United States had began major air strikes against Iraq. He spoke as bombs and missiles rained on Baghdad for the third successive night in a war to dislodge President Saddam Hussein from power.
Earlier, British Defense Chief Sir Michael Boyce said all key components of the sourthern Iraqi oilfields, which pump half the country's output, had been safely secured.
Only seven oil wellheads had been torched in the south, less than the 30 previously reported, although oil-filled trenches were also ablaze, he said.
British Defense Minister Geoff Hoon said allied forces also secured Faw, a strategic port linking pipelines to Iraq's main Gulf export terminal Mina al-Bakr.
Briefing U.S. congressional leaders, U.S. President George W. Bush said on Friday that "we're making progress" in the war on Iraq, though White House officials cautioned that U.S.-led forces still faced many risks.
As armored columns raced toward Baghdad, U.S. forces ran into resistance from Iraqi troops near Nassiriya on the Euphrates river, about 235 miles (375 kms) southeast of Baghdad, which halted their advance on Friday, according to news reporters embedded with the troops.
One murky issue, oil traders said, was whether Iraqi Saddam survived a missile attack that targeted him and other Iraqi leaders in a compound that began the war on Wednesday night.
Iraq said he did survive but there were reports that he might at least have been injured. ABC News said Saddam was seen being carried out of the rubble on a hospital stretcher wearing an oxygen mask.
Analysts at Energy Security Analysis Inc. (ESAI) in Massachusetts said they expected the general price downtrend to continue, with room for periodic price spikes, should there be widespread torching of Iraqi oilfields or if conflict spreads to Kuwait, among a number of possible developments.
Traders said a quick end to the conflict would hasten the return of Iraq's sizable exports to the market, creating the possibility of a market awash in oil.
This is a distinct possibility, they said, as OPEC, led by powerhouse Saudi Arabia, has been ratcheting production up in the past months to cover any likely interruption of Iraqi exports.
The cartel members also raised oil flow to plug shortfalls caused by a long strike in major producer Venezuela, also an OPEC member.
Falling in line with NYMEX crude, NYMEX April heating oil futures