ANALYSIS-Oil markets stay off peaks despite Iraq, Nigeria
"If you don't know where you're going, when you get there you'll be lost." -Yogi Berra
Reuters, 04.01.03, 5:53 AM ET
LONDON, April 1 (Reuters) - Loss of oil supplies from war-torn Iraq and Nigeria, where bloody clashes have choked off some production, will keep prices bubbling at close to $30 a barrel over the coming weeks, analysts and traders predict. They say there is enough supply heading into international markets to prevent a spike back to the $39.99 for U.S. light crude touched briefly in the run-up to the war. Many Brent traders are targeting a $28-$30 price band for the near future, with U.S. light crude valued at a $3 premium. "It's very unlikely we'll go right back up," said Tony Machacek of brokerage Prudential Bache. The price spike ahead of the war was partly driven by concerns that Iraqi soldiers might set fire to oil wells but an early capture of the wells by U.S.-led forces minimised this. "What we can see from the action so far is that they seem to have covered most of the southern oilfields quite well," added Machacek. Most analysts and traders agreed an 11-day sell-off that pushed Brent down to a low of $24.00 and U.S. light sweet crude to $26.30 on March 21, the day after war began, was too extreme. They also said a subsequent rebound was based on the closing in of 37 percent of Nigeria's 2.2 million barrels per day (bpd) of production because of clashes between tribal groups in the Niger Delta.
DRIVING SEASON LOOMS Nigerian low-sulphur crude is a particularly valuable commodity ahead of the U.S. driving season because it yields large quantities of gasoline. The U.S. gasoline market consumes more than 12 percent of all world oil. Fears U.S. gasoline supplies will run short during peak demand, pushing up prices of gasoline and in turn crude, were stoked by inventory data last week showing a one-percent fall in U.S. gasoline stocks when they should have been rising. "Inventories need to start climbing very sharply to give any chance of avoiding a huge spike in gasoline prices," said J.P. Morgan's Paul Horsnell in a research note.