OIL UPDATE: Nymex Takes A Breather,Range-Bound In Access

Friday April 4, 2:24 PM By Irene Kwek Of DOW JONES NEWSWIRES

SINGAPORE (Dow Jones)--Crude oil futures traded mostly in a tight range during Asian trade Friday, as market participants took a breather after volatility in recent sessions.

At 0610 GMT, May crude futures on the New York Mercantile Exchange stood at $28.85 a barrel, down 12 cents from the floor trade close. In New York Thursday, Nymex May gained a modest 41 cents to $28.97/bbl, as some traders covered short positions on perceptions that the market had deeply oversold in the previous sessions.

"After (the recent) extreme volatility, the market needs some sort of breather to regain the energy. But we do not know when it will resume. Breaking news out of Iraq will be the key factor to look out for," a trader based in Singapore said.

"It's going to be range-bound on a lack of fresh factors, although the tide has changed somewhat. The direction is more biased to further losses," he added. "Oil prices are following renewed perception that the U.S. is making good headway on the war front."

Volume was moderate in after-hours electronic trading, with 1,629 lots traded as at 0545 GMT, with major players keeping to the sidelines, one U.K. broker observed.

"It's been a very quiet night and the majority of the volume is from 'local traders' - people who are trading their own accounts," he said. "I still think we're going to have a down day. (The overnight rally) didn't do it on any fundamental news, and people will be looking to sell into any rallies."

Front-month May crude will likely be supported initially at $28.60/bbl, and at $28.20/bbl below that, the broker said.

"It's going to be day to day developments (in the Iraq war) that the market will be watching. The concern in Nigeria has somewhat been quelled ... now it's just mainly Iraq and whatever comes from there in terms of developments and progress the coalition troops are making," the Singapore-based trader said.

Crude Futures Locked In $26-$32/bbl Range

Looking further ahead, U.S. crude futures could be locked in a tight range in the month ahead.

"After the volatility that we've had in the last two or three weeks, (crude) oil will trade in a relatively narrow range of $26-$32/bbl," said David Thurtell, commodity strategist at Commonwealth Bank based in Sydney.

"On the downside, if prices weaken by another few dollars, there will be talk by the Organization of Petroleum Exporting Countries of cutting back quotas. On the upside, if prices go through $32/bbl, OPEC will start talking about an increase in quotas," he said.

While fluctuations in prices will depend on day-to-day developments from the war in Iraq, low oil stocks around the world may help to keep prices supported.

"In terms of the risks, prices may stay at the high (end of the) range because oil stocks around the world are very, very low," Thurtell said.

"When stocks are low, there is a high risk that there is some sort of outage, from war or civil strife that we've seen in Venezuela and Nigeria. OPEC is producing close to capacity, so there's not much margin for error," he added. "The risks are still skewed for prices to stay in the high-$20s, rather than push down to the mid-$20s."

On the war front, U.S. forces occupied part of Baghdad's airport before dawn Friday, putting them less than 10 miles from the seat of Saddam Hussein's government and closer to gaining control of a key lever of power.

U.S. Special Operations forces raided one of Saddam Hussein's favorite residences - the Tharthar Presidential Palace northwest of Baghdad - seizing documents but failing to find the Iraqi leader or his sons.

-By Irene Kwek, Dow Jones Newswires; 65-64154062; irene.kwek@dowjones.com

-Edited by Simon Hall