||21 Mar 2003 20:16
as West secures key Iraqi oilfields |
(Reuters) - Oil prices have deepened a week-long plunge to hit
four-month lows as U.S. and British forces secured key Iraqi
oilfields and ports, calming market fears of widespread destruction
by Iraqi troops.
A big wave of extra OPEC oil arriving in the West,
replacing supply lost from war-torn Iraq, also helped ease the
threat of shortages on Friday.
U.S. crude plumbed a four-month low of $26.30, ending the
day down $1.12 cents at $27.00. Brent crude oil futures in London
fell $1.15 to $24.35 per barrel, having also hit a four-month low.
The value of oil has dropped by 30 percent in a week,
having peaked at nearly $40 last month.
"The capture of key oil facilities intact is adding to
bearish sentiment," said Tony Machacek, a broker at Prudential-Bache
British Defence Chief Sir Michael Boyce said all key
components of the southern Iraqi oilfields, which normally pump half
the country's output, had been secured.
British troops also captured Iraq's Faw peninsula on the
Gulf, a strategic oil export route.
"We are trying to make sure that the economic
infrastructure of Iraq is left as intact as possible," said Boyce.
Only seven oil wellheads had been torched in the south,
less than the 30 previously reported, although oil-filled trenches
were also ablaze, he added.
He could not confirm reports that Iraqi President Saddam
Hussein may have been killed or injured in the first wave of
The wellhead fires are a long-term worry for oil markets,
but have no immediate impact on supply because Iraq's Gulf exports
stopped on Monday and this has already been factored into prices,
said Leo Drollas of London's Centre for Global Energy Studies.
"Whether Iraqi oil stays in the ground or is burned above
ground, it still doesn't get to the market," he said.
Iraq ranked as the world's seventh largest oil exporter
before the war.
OPEC exporters, especially Saudi Arabia, have hiked output
over the past few months, first to cover a strike in Venezuela and
then to cool a price spike fuelled by war fears.
Imports of oil in the United States are rising despite the
cut-off in Iraqi supplies.
"It is the weight of oil, rather than the force of bombs,
which is pushing markets lower," Drollas said. "OPEC is now
producing more oil than has been lost."
U.S. Energy Secretary Spencer Abraham said OPEC output was
now in line with its total level last November despite shortfalls
from Iraq, Venezuela and Nigeria.
Western oil companies operating in Nigeria have slashed
production and are expected to close a key export terminal this
weekend because of political unrest.
Brokers said investors were selling positions built up on
futures markets when U.S. crude rallied to a 12-year peak close to
$40 in late February.
"The market has now moved from a war premium to a victory
discount," said independent oil analyst Simon Games-Thomas.
Price hawks in OPEC are already concerned about the slump,
which is good news for world economic growth, but hits revenue for
the cartel of mostly Middle Eastern countries.
The dive has also revealed deep splits in the 11-member
Organisation of the Petroleum Exporting Countries.
OPEC Secretary-General Alvaro Silva said on Thursday that
members have been authorised to use spare output capacity if
necessary to make up a shortfall in Iraq supply.
But Iranian Oil Ministry Adviser Hossein Kazempour
Ardebili said any output hike would be a "violation" since no
decision had been taken to raise OPEC quota limits.
He said extra oil would be a "green light" to the United
States to launch an attack on one of OPEC's founding members.
Saudi Arabia, the world's top exporter and a key U.S.
ally, is pumping more than a million bpd above its quota of 8
million bpd, according independent estimates.
So far Gulf states near Iraq have reported no disruptions
to oil production, nor any disturbances to tanker movements in the
Gulf, which is the artery for 40 percent of world oil exports.
An oil refinery depot in southwestern Iran close to the
border with Iraq was hit by a rocket on Friday, Iranian government
sources said. It was not clear where the rocket, which hit the depot
in the city of Abadan, had come from.
Iraq's neighbour, Kuwait, said it cut throughput at its
refineries as a precautionary move after a near miss by two Iraqi
missiles on Thursday.