Oil Prices Plunge $3 a barrel.....
Posted: Tue Mar 18, 2003 1:56 pm
March 18, 2003, 12:33PM
World oil prices plunge $3 a barrel
Reuters News Service
LONDON - World oil prices slid today as the United States and Iraq made final preparations for war, easing market uncertainty over the conflict which had kept prices sizzling for weeks.
Dealers said everything now pointed towards an easy U.S. victory over the world's seventh largest oil exporter in action they expect to cause only a brief supply disruption.
International benchmark Brent crude oil slumped by $3.08 per barrel, or 10 percent, to a three-month low of $26.40 at one point. It steadied later at $27.60 per barrel, $1.88 or 6.4 percent down on the day.
U.S. crude futures fell $2.63 to $32.30 per barrel, having touched a low of $31.50.
"The uncertainty is over. The market thinks we are going to war and we are going to win," said Peter Gignoux of Schroder Salomon Smith Barney.
Iraqi President Saddam Hussein rejected a U.S. ultimatum to quit Baghdad and vowed to fight a U.S.-led invasion that could start in just over a day.
U.S. President George W. Bush gave the Iraqi leader 48 hours -- until early Thursday Baghdad time -- to flee or he would unleash U.S. and British forces massed on its frontiers.
"The United States is 48 hours away from starting an invasion and that means that the end of uncertainty for the market is near. No market likes uncertainty," said David Thurtell at Commonwealth Bank in Sydney.
In late February, U.S. crude prices peaked near $40 a barrel, a level not seen since the 1990-1991 Gulf crisis.
Tuesday's collapse brought the four-day price fall on Brent to 20 percent.
"The oil market is working on the basis there will be an overwhelming allied victory," said Sydney-based independent oil analyst Simon Games-Thomas.
High oil prices over the past 12 months have hurt global economic growth, and the latest decline helped fuel a sharp rally in stock markets.
GULF WAR RERUN?
In the last Gulf War, prices dropped from over $30 to barely $20 when U.S.-led forces launched their 1991 offensive to remove Iraqi forces from Kuwait and it became clear Iraq would not harm oilfields in Saudi Arabia, the world's top exporter.
The Middle East supplies 40 percent of global crude exports.
Analysts warn, however, that upside risks remain if Iraq should torch its own oilfields in the face of defeat, or if the conflict is drawn out.
An invasion would almost certainly close Iraqi crude output of 2.5 million barrels per day. Its southern neighbour, Kuwait, may also be forced to shut some fields near their border.
Iraqi exports have already fallen to a trickle because international oil traders are unwilling to assume the risk on uncertain supplies.
OPEC President Abdullah al-Attiyah said the exporting cartel would do its best to guarantee adequate supplies, the official Qatari news agency reported.
Many OPEC members have already dramatically increased supplies to cool prices, and cover any possible shortfall from Iraq. Analysts believe any prolonged outage of Iraqi supply, with some impact on Kuwait, would test the group's spare capacity to the limit.
The United States, the world's top oil consumer, has made preparations to release some of its strategic oil reserves to prevent any interruption. But the signal to open the taps on these emergency stocks will come only when the government decides a shortage has developed.
World oil demand typically weakens sharply in the second quarter of the year at the end of the northern winter, and analysts see this reducing the risk of a supply crunch.
"OPEC has been storing crude for some months and there is a significant amount of OPEC crude already on the water heading to Western ports," said Games-Thomas. "It looks like there could be a surplus of crude in the short term, if there's no serious damage to oil facilities during the war."
World oil prices plunge $3 a barrel
Reuters News Service
LONDON - World oil prices slid today as the United States and Iraq made final preparations for war, easing market uncertainty over the conflict which had kept prices sizzling for weeks.
Dealers said everything now pointed towards an easy U.S. victory over the world's seventh largest oil exporter in action they expect to cause only a brief supply disruption.
International benchmark Brent crude oil slumped by $3.08 per barrel, or 10 percent, to a three-month low of $26.40 at one point. It steadied later at $27.60 per barrel, $1.88 or 6.4 percent down on the day.
U.S. crude futures fell $2.63 to $32.30 per barrel, having touched a low of $31.50.
"The uncertainty is over. The market thinks we are going to war and we are going to win," said Peter Gignoux of Schroder Salomon Smith Barney.
Iraqi President Saddam Hussein rejected a U.S. ultimatum to quit Baghdad and vowed to fight a U.S.-led invasion that could start in just over a day.
U.S. President George W. Bush gave the Iraqi leader 48 hours -- until early Thursday Baghdad time -- to flee or he would unleash U.S. and British forces massed on its frontiers.
"The United States is 48 hours away from starting an invasion and that means that the end of uncertainty for the market is near. No market likes uncertainty," said David Thurtell at Commonwealth Bank in Sydney.
In late February, U.S. crude prices peaked near $40 a barrel, a level not seen since the 1990-1991 Gulf crisis.
Tuesday's collapse brought the four-day price fall on Brent to 20 percent.
"The oil market is working on the basis there will be an overwhelming allied victory," said Sydney-based independent oil analyst Simon Games-Thomas.
High oil prices over the past 12 months have hurt global economic growth, and the latest decline helped fuel a sharp rally in stock markets.
GULF WAR RERUN?
In the last Gulf War, prices dropped from over $30 to barely $20 when U.S.-led forces launched their 1991 offensive to remove Iraqi forces from Kuwait and it became clear Iraq would not harm oilfields in Saudi Arabia, the world's top exporter.
The Middle East supplies 40 percent of global crude exports.
Analysts warn, however, that upside risks remain if Iraq should torch its own oilfields in the face of defeat, or if the conflict is drawn out.
An invasion would almost certainly close Iraqi crude output of 2.5 million barrels per day. Its southern neighbour, Kuwait, may also be forced to shut some fields near their border.
Iraqi exports have already fallen to a trickle because international oil traders are unwilling to assume the risk on uncertain supplies.
OPEC President Abdullah al-Attiyah said the exporting cartel would do its best to guarantee adequate supplies, the official Qatari news agency reported.
Many OPEC members have already dramatically increased supplies to cool prices, and cover any possible shortfall from Iraq. Analysts believe any prolonged outage of Iraqi supply, with some impact on Kuwait, would test the group's spare capacity to the limit.
The United States, the world's top oil consumer, has made preparations to release some of its strategic oil reserves to prevent any interruption. But the signal to open the taps on these emergency stocks will come only when the government decides a shortage has developed.
World oil demand typically weakens sharply in the second quarter of the year at the end of the northern winter, and analysts see this reducing the risk of a supply crunch.
"OPEC has been storing crude for some months and there is a significant amount of OPEC crude already on the water heading to Western ports," said Games-Thomas. "It looks like there could be a surplus of crude in the short term, if there's no serious damage to oil facilities during the war."
