Crude Oil - biggest Drop in 16 Months

verfasst von KEEP-COOL, 18.03.2003, 19:55

-->Crude Oil Has Biggest Drop in 16 Months on Expected Iraq Defeat
By Mark Shenk


New York, March 18 (Bloomberg) -- Crude oil had its biggest decline in 16 months on speculation any war in Iraq will end quickly and with limited disruption to Middle East oil supplies.

U.S. President George W. Bush yesterday triggered a 48-hour countdown to war by ordering Iraqi leader Saddam Hussein and his sons to leave his country or face attack. Prices have plunged 15 percent in the last four sessions as U.S. and U.K. troops prepared to invade Iraq, which pumps 3 percent of the world's oil. The Middle East is responsible for a third of global output.

``There is a lot of confidence that the U.S. and its allies will quickly defeat Iraq,'' said Phil Flynn, a senior energy trader at Alaron Trading Corp. in Chicago. ``Any disruption will probably be minimal and any missing oil will be made up by the world's strategic reserves and extra shipments from Saudi Arabia.''

Crude oil for April delivery dropped $2.73, or 7.8 percent, to $32.20 a barrel as of 11:49 a.m. on the New York Mercantile Exchange. That's the biggest one-day drop for the contract nearest expiration since Nov. 15, 2001, when oil fell on the threat of a price war between OPEC members and Russia.

Nymex prices fell as low as $31.50, the lowest price since Jan. 13, in overnight electronic trading. Oil prices remain 30 percent higher than a year earlier.

In London, the May Brent crude-oil futures contract was down $1.78, or 6 percent, to $27.70 a barrel on the International Petroleum Exchange.

`Repeat of 1991'

New York oil prices peaked at a record $41.15 a barrel in October 1990 after Iraq invaded Kuwait. Oil then plunged by a third on Jan. 17, 1991, after U.S.-led forces began their air attack on Iraq, reducing the threat to neighboring oil producers.

Some traders ``are looking for a repeat of 1991 and realize that if they wait till the shooting starts it will be too late,'' said Jim Steel, director of commodity research at Refco Inc. in New York.

Price declines accelerated today as automatic sell orders, known as stops, were triggered.

``We are seeing a hedging meltdown,'' said Philip Verleger, an energy specialist with the Council on Foreign Relations. Some banks are being forced to sell to ``hedge'' themselves or protect against further declines. ``There is a huge overhang,'' he said. ``We could soon see prices in the mid-$20s.''

Saudi Arabia, the Organization of Petroleum Exporting Countries largest oil producer, is pumping ``close to'' 9 million barrels a day to meet current market demands and avert any shortage that might emerge after an attack on Iraq, an official at state-owned Saudi Aramco said.

Saudi Storage

The world's largest oil company has filled storage tanks with about 50 million barrels, the highest level in more than 10 years, the unidentified official said.

Saudi Aramco company booked at least eight 2 million-barrel tankers to haul more than 2.2 million tons of crude oil to the U.S., arriving from May onward, shipbrokers reported last week, a sign that the country is fulfilling its promise to make up for any shortfall from an Iraq conflict.

U.S. Energy Secretary Spencer Abraham has pledged to tap U.S. strategic reserves to cover any significant supply disruption. The U.S. and 25 other countries hold 4 billion barrels of emergency supplies. On the first day of the war in 1991, U.S. and European governments tapped emergency reserves.

U.S. commercial crude-oil inventories probably rose between 1.6 million and 2 million barrels last week from 269.8 million, according to an average of estimates from nine analysts before a report tomorrow from the Energy Department. Inventories were down 16 percent from a year earlier in the week ended March 7.

Bush's Speech

``The U.S. has not heard anything that would lend any credence to Saddam Hussein acting on the ultimatum he was given,'' White House spokesman Ari Fleischer told reporters today. Hussein's son Uday's rejection of the ultimatum ``is the latest mistake,'' Fleischer said.

The U.S. and U.K. have more than 250,000 military personnel in the region and plan to launch an invasion with a ``shock-and- awe'' missile attack. The countdown means a conflict might begin as early as Wednesday evening.

``Events in Iraq have reached the final days of decision,'' Bush said in a televised speech last night from the White House. ``Peaceful efforts to disarm Iraq have failed again and again because we are not dealing with peaceful men.''

In a 14-minute televised address last night, Bush told UN weapons inspectors and journalists to leave Iraq. All 136 UN inspectors flew out of Baghdad to Cyprus today, UN officials said.

The Turkish government probably will resubmit a proposal to allow in 62,000 U.S. troops for a war on Iraq to parliament tomorrow or Thursday, Prime Minister Recep Tayyip Erdogan said. The proposal was defeated by four votes on March 1. If the Turkish parliament approves the proposal the U.S. could open an offensive on Iraq's northern frontier.

``We're counting on a quick victory,'' said John Kilduff, senior vice president of energy-risk management at Fimat USA Inc. in New York. ``The expectations are that everything will go exceedingly well, but I wouldn't be surprised if Saddam Hussein has a trick up his sleeves. The surprises from now on will jolt us to the upside.''



All the best

K C

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• Crude Oil - biggest Drop in 16 Months - KEEP-COOL, 18.03.2003, 19:55