Crude prices fall 5% as Kurds take oilfield hub

By Globe Wire Services, 4/11/2003

NEW YORK -- US oil prices dropped nearly 5 percent yesterday as Kurdish fighters took control of the oil city of Kirkuk in northern Iraq a day after the fall of Baghdad, easing fears of damage to Iraqi oil fields.

Dealers said that expectations of a flood of oil from OPEC members in the coming weeks, combined with rising production from Nigeria following disruptions caused by ethnic violence, were also weighing on the market.

''Short-term the market is already bearish because OPEC supplies will build stocks. The news from Kirkuk adds to that sentiment,'' said Geoff Pyne, consultant to Sempra Energy.

US light crude oil on the New York Mercantile Exchange fell $1.39, or 4.8 percent, to $27.46 a barrel. London Brent blend crude oil eased 75 cents to $24.50 a barrel.

Kurdish guerrillas captured Kirkuk, the hub for Iraq's northern oilfields that pump 40 percent of the nation's crude, after government troops gave it up virtually without a fight.

The United States said it plans shortly to take control of the city from the Kurdish fighters, Washington's allies in northern Iraq. In Iraq's southern oilfields the US military said it aimed to restart production in less than an initial estimate of three months.

''We are hoping to pump about 200,000 bpd to 800,000 bpd. Our initial assessment was that it would take 12-15 weeks before we could expect to see any oil flowing,'' said Colonel Michael Morrow.

''We'll probably take less time than that,'' he said, adding that the US Army Corps of Engineers would attempt to speed up the process with the help of Iraqi oil workers.

A decision on the timing of a resumption in exports will not be taken until interim authorities are installed.

Also weighing on prices was a report yesterday from the International Energy Agency that said OPEC should think twice about cutting production to boost sagging oil prices because supplies remain short and the immediate outlook remains cloudy. The Paris-based IEA, which represents the world's wealthiest countries, said stocks were low in member nations, and there were doubts about the export situations in Iraq, Nigeria, and Venezuela.

''Significant production curbs . . . may impact upon the industry's ability to rebuild stocks,'' the report said.

But OPEC's president, Abdullah Hamad bin al-Attiyah of Qatar, said yesterday in Paris that the world's oil markets are glutted, and the resumption of Iraqi oil production could make that worse.

Al-Attiyah said the current crude oil excess totals more than 2 million barrels a day.

OPEC officials said Monday that oil ministers planned to meet April 24 in Vienna whether or not the war in Iraq has ended.