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.