Oil Prices Fall on Basra Uprising Report

<a href=asia.reuters.com>Reuters Tue March 25, 2003 02:23 PM ET

NEW YORK (Reuters) - World oil prices fell back on Tuesday as British television networks said there were reports of an uprising against President Saddam Hussein in Iraq's second city of Basra.

U.S. light crude CLc1 fell 51 cents to $28.15 a barrel after a $1.75 jump on Monday. London Brent crude LCOc1 dropped $1.04 a barrel to $25.05.

Military officials said they knew nothing about any revolt in Basra but the British military said they would do everything possible to encourage and support any Iraqis trying to overthrow forces loyal to Saddam.

The reports reversed early gains made as Iraqi forces resisted a U.S. military thrust toward Baghdad while tribal violence in Nigeria kept nearly 40 percent of the country's crude output shut.

U.S. and British forces faced tough resistance from Iraqi fighters as they opened an assault on Republican Guards defending approaches to Baghdad in a campaign aimed to oust Iraqi President Saddam Hussein.

Oil fell 25 percent last week as traders bet on a short war with little damage to Iraq's oil industry. Before the conflict, Iraq exported about 1.7 million barrels per day (bpd) to the 77 million bpd world market.

But confidence in a quick war waned after the weekend as U.S. and British forces suffered casualties and saw slower progress.

"While there are few who doubt the outcome of the conflict in Iraq, given the technological superiority of coalition forces, Iraq's oil infrastructure escaping damage is not as certain," said John Kilduff of Fimat bank in a report.

Meanwhile a series of bloody clashes in Nigeria forced closure at the weekend of just over 800,000 bpd of the 2.2 million bpd produced by Western oil firms in the West African OPEC nation.

Ethnic groups in the oil-rich Niger Delta have said they were battling for a greater share of the country's oil wealth.

Nigeria is one of the top six oil exporters to the United States, where fuel supplies have been running at 27-year lows partly due to an oil workers' strike in Venezuela.

Nigeria, which averaged 560,000 bpd to U.S. refiners last year, where its crude is valued for its high gasoline content, also exports to Europe and Asia.

"Nigerian crude is not the kind of stuff you want to be short of," said Paul Horsnell, oil analyst at J.P. Morgan. "It's very serious. It's not a little local disturbance."

The Organisation of Petroleum Exporting Countries said on Monday it could make up any shortfall in supply from Nigeria, OPEC's fifth largest producer.

The group has also pledged to make up for the disruption to Iraqi exports but now has only the slimmest of spare capacity cushions.