Crude oil prices in Asia slump after Iraq backs down
Crude oil prices in Asia slump after Iraq backs down
SINGAPORE (Reuter): Crude oil prices in Asia fell sharply yesterday as traders cashed in their profits after Iraq appeared to have defused Gulf tensions with the United States.
"I would think the rally is over, barring fresh developments," said one crude oil trader. "But with this market, you should never be surprised."
Benchmark North Sea Brent November futures prices slumped 64 cents per barrel on the Singapore International Monetary Exchange (SIMEX) to end at US$22.49.
The slide continued in London, where Brent futures are also traded. November Brent last traded at $22.38 in early evening Asia time.
On Thursday, at the height of the tension following Iraq's firing of missiles at U.S. warplanes, November Brent had peaked at $23.60.
New York Mercantile Exchange (NYMEX) October crude oil futures, another benchmark, were last traded in Asian hours at $24.00 per barrel, down from Thursday's $25.35 peak.
Iraq said late on Friday it would no longer fire anti-aircraft missiles at U.S. and allied warplanes enforcing no-fly zones in northern and southern Iraq.
The announcement somewhat eased tensions that had continued for two weeks since U.S. bombers and warships fired 44 missiles at Iraqi targets in retaliation for Iraq's incursion into northern Kurdish areas of the country.
The United States said further attacks on Iraq were possible, but at the same time said it would not overreact.
The U.S. ambassador to the United Nations, Madeleine Albright, said in a television interview: "It looks as though Saddam Hussein is not going to do anything else... I think we're going to keep watching the whole issue very, very carefully."
Crude oil prices started to ease in London late on Friday. Brent slipped four cents per barrel to $23.13, but NYMEX crude shed 49 cents to $24.51.
London
In London yesterday, oil prices fell further.
November futures for international benchmark North Sea Brent blend traded down 70 cents at $22.43 a barrel shortly after opening in London.
Brent for October hit a five-year post Gulf War peak at $24.39 a barrel last Thursday after Iraq fired missiles at U.S. planes and Washington sent more weaponry to the region.
Traders said Baghdad's apparent decision to step back from the brink of all-out confrontation probably meant oil prices had peaked, for the time being at least.
"The shooting has stopped and that's given the market the chance to retrace some of its big gains," said Bo van Wijk at Swiss bank UBS.
"We shorted (sold) the market on Friday because we felt that it had hit a short-term top on Iraq," said a London-based oil trader at U.S. company.
But dealers warned that a resumption of military activity in the region, raising the specter of a disruption to Middle East crude supplies, could easily send oil soaring again.
"I don't think at this stage that we'll see dramatically higher prices but Saddam is out of his cage, he appears to be ahead of the game politically and that spells danger for the market," said Russell Hill, head of trading at oil company OMV in London.
Traders said that the onset of peak winter demand at time of low inventories in the west, would almost certainly prevent any big slump in the value of crude.
"We have very low distillate (heating oil and diesel) stocks already and its not even October," said van Wijk at UBS. "The market will remain very well supported whatever happens in Iraq."
Hard-pressed oil buyers already are having to cope without several hundred thousand barrels a day of Iraqi crude expected back on the market under an oil-for-food exchange arranged with Iraq by the United Nations in May.
The accord, designed to raise cash for humanitarian supplies in Iraq, was put on hold after Baghdad sent troops into northern Iraq's Kurdish safe havens.