Nymex oil seen opening $1 up on fear of longer Iraq war

<a href=www.vheadline.com>Venezuela's Electronic news Posted: Thursday, March 27, 2003 By: PETROLEUMWORLD

Crude oil futures at the New York Mercantile Exchange are expected to open more than $1 a barrel higher Thursday, on growing fears that Iraqi production may stay off the market longer than many had expected as the war in Iraq drags on.

UK Air Marshal Brian Burridge reportedly said Thursday that it would take three months to restore oil production from Iraq's southern Rumailah field.

Allied forces have seized control of the 1.8 million-barrel-a-day field, and there been reports that oil could start flowing from the region even before the conflict is over. But Burridge dashed those hopes, saying the poor condition of the equipment in the filed will mean it will take much longer to restore production.

"They are in terrible condition," he said. "It will take three months and then we can begin pumping oil.

The comments come amid growing signs that the US-led war is likely to take much longer than many had expected, analysts said.

"People are talking about signs of war being extended longer than expected," said Tom Bentz, an energy analyst at BNP Paribas Futures in New York.

Nymex crude oil futures are expected to open $1 higher, while heating and gasoline futures are seen opening 300-350 points higher.

Also supporting prices are uncertainty over the outage of nearly 40% of Nigerian production and concerns about tight gasoline supplies ahead of the summer driving season, Bentz said.

All of those factors are likely to lift the front-month May crude futures to $30 a barrel, Bentz said. Once that psychologically important level is taken out, prices could surge as high as $31 a barrel, he added.

May-June Crude Spread Widens

In a sign of growing supply tightness, the nearby Nymex May-June spread has widened to nearly $2 a barrel. The spread had narrowed to less than $1 last week as prices tumbled on hopes of a quick end to the Iraq war.

Meanwhile, it remained unclear how quickly Nigerian output would return to normal.

The Ijaw militants battling Nigerian forces in the oil-rich Niger Delta called for a ceasefire Wednesday after the state government agreed to support their demands ahead of next month's general elections.

The move raised hopes that Nigeria's production, down 40% because of the violence, will quickly return to normal as oil companies resume operations.

But the three major oil companies have yet to restore production or return staff to the country, and traders say the production shut in continues to cause severe delays in oil loading out of Nigeria.

"There are still disruptions in Nigeria," one trader said. "It's very difficult to say where the delays are. April cargoes are also being switched around now. There have been a lot of date switches and no one seems to know where their cargoes are."

The situation is likely to remain unclear for some time, he added.

In overnight trading, May crude ended up $1.07 at $29.70, while April heating oil futures were up 289 points at 77.30 cents a gallon. April gasoline futures were up 353 points at 95.95 cents.

By Masood Farivar, Dow Jones Newswires; 201-938-2094; masood.farivar@dowjones.com