Oil slips as war worries soothed by Iraq arms offer<\/p>\n
Jonathan Leff
\nReuters
\nLondon<\/p>\n
Oil prices retreated to their lowest level in three weeks on
\nThursday, as the prospect of a U.S. war against Iraq appeared to
\nrecede and oil supplies looked healthy, dealers said.<\/p>\n
Baghdad moved again to thwart the U.S. threat on Thursday,
\ninviting the United States to visit Iraqi sites suspected of
\nproducing weapons of mass destruction.<\/p>\n
London-traded benchmark Brent crude oil futures fell on the
\nnews, trading down 38 cents to US$27.75 a barrel after matching a
\nthree-week low of $27.60 a barrel. U.S. light, sweet crude oil
\nwas 40 cents down at $28.95 a barrel.<\/p>\n
The fear of a U.S. invasion to unseat Iraqi President Saddam
\nHussein had driven prices to 12-month highs at over $30 a barrel
\nthe past few weeks, but now traders sense the pounding of the war
\ndrums has softened.<\/p>\n
On Monday, U.S. President George W. Bush sounded a less
\nhawkish note in his first major Iraqi address to the nation,
\nsaying no attack was imminent and that Washington would not act
\nalone against Baghdad.<\/p>\n
\"The key issue is that Bush seems to be moving along the path
\npressing for international cooperation for military action
\nagainst Iraq,\" said Lawrence Eagles of GNI Research.<\/p>\n
\"That reduces the risk of an international backlash and is
\ntherefore worthy of a reduction in the risk premium.\"<\/p>\n
Already the price premium on a barrel of oil this December
\nversus the end of 2003 -- seen by some as a measure of the \"war
\npremium\" -- has dropped from a huge $6 two weeks ago to just $4
\nas traders see a reduced immediate risk to supplies.<\/p>\n
Washington's push for an assault on Iraq was undermined by the
\nrelease of a letter from the CIA reporting a low chance of an
\nunprovoked Iraqi attack and a \"pretty high\" chance of Baghdad
\nstriking, perhaps with chemical or biological weapons, if the
\nUnited States hit first.<\/p>\n
The letter, released by Senate Democrats who want a broader
\ndebate on whether to attack Iraq, was unlikely to derail what are
\nexpected to be overwhelming votes in Congress to authorize Bush
\nto use military force against Iraq.<\/p>\n
But the larger debate continues at the United Nations, where
\nBush has the more arduous task of persuading the five veto-
\nholding Security Council members -- notably France -- to approve
\na new resolution calling for tougher inspections.<\/p>\n
France is pushing for two resolutions, one calling for new
\ninspections and a second to deal with the use of force if Iraq
\nrefuses.<\/p>\n
Baghdad has already agreed to the return of inspectors under
\nexisting U.N. resolutions and on Thursday took the unusual step
\nof invited the United States directly.<\/p>\n
\"The American administration are invited to inspect these
\n(weapons) sites,\" said Abdul Tawab Mullah Hawaish, deputy prime
\nminister and minister responsible for Iraq's weapons programs.<\/p>\n
\"As I am responsible for the Iraqi weapons programs I confirm
\nhere that we have no weapons of mass destruction and we have no
\nintention to produce them,\" he said.<\/p>\n
While looming prospect of a supply disruption from the key
\nMiddle East region still hangs over the market -- particularly
\nafter this week's tanker blast off Yemen and the attack on U.S.
\nMarines in Kuwait -- attention has also shifted back toward
\nmarket fundamentals.<\/p>\n
Although U.S. crude stockpiles last week fell to their lowest
\nlevels in over 20 years, dropping over 4.7 million barrels
\naccording to the Department of Energy, dealers saw little short-
\nterm shortage in the market.<\/p>\n
The draw in stocks had been expected following a double-whammy
\nof a hurricane in the Gulf of Mexico, which disrupted crude
\nproduction and imports as well as reducing the critical refining
\nfacilities in the region.<\/p>\n
But OPEC cheating kept prices off the $30 red-alarm mark as
\ncartel members produced 2.33 million barrels per day (bpd) over
\ntheir official quotas, a Reuters survey found this week.<\/p>",
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