NYMEX oil stays sharply off on Nigeria restarts, Iraq

Reuters, 04.04.03, 12:23 PM ET NEW YORK, April 4 (Reuters) - NYMEX crude oil futures stayed sharply lower midday Friday as shut-in Nigerian crude production began to restart and U.S. forces seized Baghdad's main airport, reinforcing hopes for a quick end to the war. Rising production from OPEC, evidenced by last week's surge in Saudi Arabia's exports to the United States and increasing shipments from Venezuela, remained a bearish factor. At 1215 EST (1715 GMT), NYMEX May crude traded 86 cents lower at $28.11 a barrel. Near the opening, it slumped $1.02 to a session low of $27.95. NYMEX prompt crude prices are down nearly $12 or 30 percent from a 12-year high of $39.99 reached on Feb. 27. In London, May Brent crude was down $1.08 at $24.42 a barrel. "The market is convinced that we will see rivers of oil flowing now that we have higher OPEC production and Nigeria is restarting previously lost production," said Phil Flynn, energy market analyst at Alaron Trading in Chicago. "Unless demand builds up as we go into the summer driving season, this influx of oil means prices will stay down." ChevronTexaco (nyse: CXV - news - people) said Friday it gradually restarted Nigerian production forced shut for 12 days due to ethnic unrest. It is aiming for Escravos crude production at 310,000 barrels per day, out of normal output of 440,000 bpd. Royal Dutch/Shell <SHEL.L> <RD.AS> said it had restarted on Thursday about 18,000 barrels per day of its Nigeria Forcados production at its Estuary flow station, after ethnic clashes forced it to shut production about two weeks ago. It said it planned to reopen other stations in the Southern Swamp of the western Niger Delta in "the coming days." Nigeria's sweet crude is a key gasoline maker for U.S. refiners heading into the heavy driving demand season at the end of May. Crude's heavy losses extended selling pressure from overnight that was sparked by news of U.S. forces taking control of Saddam International Airport, less than 10 miles from Baghdad This buttressed hopes that the war to oust Iraq's regime will end sooner rather than later, which "helps pave the way for Iraq's oil exports to resume before mid-year," said Mike Rothman, senior energy market analyst at Merrill Lynch. U.S. forces have secured 80-90 percent of Iraq's southern oil production capacity and aim to get Iraqi workers back on the job soon, according to a senior U.S. Army officer. Iraqi Information Minister Mohammed Saeed al-Sahaf said on Friday Iraq had no plans to use chemical or biological weapons against invading U.S. and British forces despite a threat to use "nonconventional " methods. Asked if Iraq would used weapons of mass destruction, Sahaf told a news conference: "No, not at all. But we will conduct a kind of martyrdom operations." Iraq denies U.S. and British accusations that it possesses weapons of mass destruction. The U.S.-led invasion of Iraq aims to disarm Iraq of those suspected banned weapons and drive President Saddam Hussein from power. Venezuela's restart of gasoline exports to the United States and crude exports rising to nearly two-thirds of pre-strike levels put more pressure on futures prices. Also in traders' focus are economic data indicating a struggling economy, as U.S. payrolls dropped by a worse-than-expected 108,000 in March, the government said Friday. The data highlighted the economy's fragility amid a war with Iraq that many economic analysts say has dampened hiring. NYMEX May gasoline futures were down 2.56 cents at 84.60 cents a gallon, trading rangebound between 84.00 to 85.80 cents. NYMEX May heating oil futures fell 1.47 cents to 71.70 cents a gallon, rangebound between 70.90 to 72.10 cents.