Oil slips as Saddam falls in Baghdad

Stuff 11 April 2003

LONDON: Oil prices dropped yesterday as the rapid fall of Iraqi President Saddam Hussein in Baghdad kept pressure on prices in what traders called a bearish market.

Also weighing on markets was a report from the West's energy watchdog, the International Energy Agency, saying a "wall of crude" is poised to reach importing countries in the second quarter, the weakest period for demand.

Scenes in central Baghdad of thousands of jubilant civilians defacing pictures and toppling statues of Saddam, coupled with streets filled with US tanks and devoid of Iraqi police beamed around the world on Wednesday, fuelled the belief that Saddam's rule had ended in the capital.

"Iraq is still the main news in the markets," said Christopher Bellew of brokers Prudential-Bache International.

US light crude oil on the New York Mercantile Exchange slipped 59 cents to $28.26. London Brent blend was down 47 cents to $24.78 in thin electronic trade.

In Iraq, US forces continued to attack forces loyal to Saddam, having taken central Baghdad with little resistance.

The BBC reported that US-based Kurdish forces had taken the key northern Iraqi oil city of Kirkuk without a fight on Thursday. A spokesman for the Kurdistan Democratic Party told Reuters they were still making checks on the situation.

Oil markets appear to have accepted a US victory in the battle to unseat Saddam, with the focus now shifting to how quickly Opec will move to restrain production.

Continued speculation that Opec will cut production quotas or simply reduce excess supply at a proposed emergency meeting kept prices supported, although a potential delay to the proposed April 24 date has limited its impact.

Opec President Abdullah al-Attiyah said several other dates were under consideration - April 28, May 3 and May 7.

Cartel linchpin Saudi Arabia has also told its global and Asian oil customers that it will continue to supply full contractual volumes next month, indicating any cut-back in production over quotas may have to wait until June.

Saudi Arabian Oil Minister Ali al-Naimi said on Wednesday that Riyadh was not considering cutting supplies for May ahead of the proposed Opec meeting.

Opec SIZES UP MARKET

The Organisation of Petroleum Exporting Countries had increased output this year to counter supply disruptions from Venezuela, Nigeria and Iraq - but now attention has shifted to a potential oil glut developing during the weak second quarter.

Opec-member Iran's oil minister said on state television world oil markets were over-supplied, but the head of the IEA said industial stockpiles needed to rebuilt.

The agency said in its monthly report that despite an apparent "wall of crude" heading toward importers' shores, a cut in Opec production now appeared "premature."

Opec at the proposed emergency meeting is expected at least to erase excess supplies of some two million barrels a day now being pumped above formal output limits of 24.5 million bpd.

Algerian Oil Minister Chakib Khelil said on Wednesday Opec would be able to achieve market balance just by complying with official limits without cutting quotas.

Leading Opec producer Saudi Arabia pushed output 1.5 million barrels a day above its official quota to help cushion the impact of the loss of Baghdad's 1.7 million barrels per day (bpd) of exports during the US invasion of Iraq.

US Vice President heightened expectations of a return of Iraqi oil to world markets, saying on Wednesday he expected Iraqi exports could reach as much as three million bpd by the end of the year. The Gulf State was producing about two million bpd last year, according to the US Energy Department.