Iraq halted its oil exports Friday after United Nations officials rejected its demand that buyers pay a 50�/bbl surcharge into an Iraqi bank account in violation of UN sanctions against that country.
The independent satellite television network Al Jazirah in Qatar reported that Iraqi officials early Friday shut down exports through the Turkish port of Ceyhan and through Mina al Bakr on the Persian Gulf.
That will test the energy futures market's faith in US officials' resolve to counter that move by releasing oil from the Strategic Petroleum Reserve. An initial knee-jerk rise in oil prices on international markets is likely.
In its long-running dispute with the UN, Iraq has several times threatened to halt its exports of 2.3 million b/d under an UN-supervised oil-for-food program. On Thursday, Iraqi officials said they would stop exports at midnight.
Potential disruptions of oil supplies generally drive up prices on international energy markets. Yet, oil prices plunged Thursday in New York and London after US Energy Sec. Bill Richardson said US officials might be willing to release oil from the SPR to help offset the loss of Iraqi crude. He also indicated that Saudi Arabia and other producers might increase their production to pick up some of that slack.
The January contract for benchmark US light, sweet crude fell 81� to $33.70/bbl Thursday on the New York Mercantile Exchange, while the February position dropped 61� to $32.88/bbl. Both contracts declined in after-hours electronic trading to $33.42/bbl and $32.63/bbl, respectively.
North Sea Brent crude futures also fell sharply on the International Petroleum Exchange in London, with the January contract down 80� to $31.88/bbl for the day after trading in the range of $31.80-$33.15/bbl.
On the Singapore exchange, North Sea Brent crude for January delivery lost 80� to settle at $31.88/bbl. The February contract lost 56� to settle at $31.33/bbl.
The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes also lost 11� to $30.39/bbl Thursday.
Meanwhile, the January contract for natural gas futures closed Thursday at a record $6.59/Mcf on the NYMEX, up 40.8� for the day, as traders reacted to a bullish report of low inventories by the American Gas Association and predictions of colder weather in the key Midwest and Northeast US markets.
In London, the January natural gas contract was up 6� to the equivalent of $4.63/Mcf.
Weather forecasts also boosted the December contract for home heating oil by 2.16� to $1.0534/gal on the NYMEX, but unleaded gasoline for the same month declined 1.91� to 88.77�/gal.