By OGJ editors
HOUSTON, Nov. 14 -- Oil futures markets sustained heavy losses Wednesday upon Baghdad's acceptance of the United Nations Security Council's resolution to allow weapons inspectors to return to Iraq after nearly 4 years.
Market players had not expected a response from Iraqi President Saddam Hussein until Friday. But on Thursday, Iraq's ambassador to the UN, Mohammed Aldouri said his country unconditionally accepted the resolution.
Following that news, crude prices descended to a 5-month low in New York and an 8-month low in London.
On Wednesday, the December contract for benchmark US light, sweet crudes plunged by 71¢ to $25.19/bbl on the New York Mercantile Exchange, while the January contract declined by 82¢ to $24.48/bbl.
Traders attributed the initial oil price drop to selling from speculators who had anticipated that Iraq would reject the UN resolution. As progress is made by weapons inspectors in coming weeks, analysts expect the so-called "war premium" to fluctuate.
Alvaro Silva-Calderon, secretary general of the Organization of Petroleum Exporting Countries, met Wednesday with Robert Priddle, executive director of the Paris-based International Energy Agency to discuss potential future areas of cooperation.
The Wednesday meeting was in Vienna. Priddle told reporters with the OPEC News Agency that he believes the international oil market is balanced between supply and demand.
"Additional supply is reaching the market, and that is balancing quite well the growth in winter demand. Stocks are not generous, but they are adequate for the winter. And so, the price is reasonably comfortable in the OPEC price band at the moment.
"There are, of course, fluctuations from day to day, with anxiety about what might happen in the world. People talk about 'a war premium.' Nobody knows what the extent of that is," Priddle told OPECNA.
Meanwhile, oil prices on the New York Mercantile Exchange rebounded somewhat Thursday after the US Energy Information Administration reported that crude oil stocks dropped unexpectedly by 6.9 million bbl for the week ended Nov. 8.
The EIA figures confirmed the American Petroleum Institute weekly data, released Tuesday, showing a drop of 7.2 million bbl for the same week.
Also on Wednesday, unleaded gasoline for December delivery dropped 1.30¢ to 68.54¢/gal. Heating oil for the same month slipped 1.76¢ to 67.25¢/gal.
The December natural gas contract rose 0.5¢ to $3.88/Mcf Wednesday on NYMEX.
On Thursday, the EIA reported natural gas storage withdrawals totaled 48 bcf for the week ended Nov. 8. The weekly results were bullish compared with 35 bcf injected for the same time last year and the 5-year average of 19 bcf of injections.
Storage is now 90 bcf below last year's level for this same period and 70 bcf above the 5-year average.
Banc of America Securities LLC analyst James K. Wicklund called the near-term gas outlook "cloudy."
"With winter weather and conflicts in the Middle East continuing to be wild cards, investors remain impressionable. The long-term trend remains positive as natural gas production continues to decline," he said.
In London, the December contract for North Sea Brent oil lost $1.02/bbl to $22.70/bbl on the International Petroleum Exchange. The December natural gas contract rose 1¢ to the equivalent of $3.786/Mcf on IPE after a day of little trading activity.
OPEC's basket of seven benchmark crudes dropped 28¢ to $23.24/bbl Wednesday.
