MARKET WATCHOil futures prices trend down as US-led forces advance into Baghdad

Futures prices for oil and petroleum products continued to fall Monday as US-led coalition forces hammered their way into Baghdad, encouraging speculation that the war in Iraq may end soon.

April 8, 2003

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Apr. 8 -- Futures prices for oil and petroleum products continued to fall Monday as US-led coalition forces hammered their way into Baghdad, encouraging speculation that the war in Iraq may end soon.

Meanwhile, Kofi Annan, secretary general of the United Nations, is maneuvering to ensure that the UN has a major role in Iraq once the shooting stops. Annan appointed Rafeeuddin Ahmed, a Pakistani, as his special advisor in that effort. Annan plans later this week to travel to London, Berlin, Paris, and Moscow to discuss with government leaders Iraq and the UN's possible role in reconstructing that country after the war.

Iraqi officials earlier rejected a UN Security Council resolution, passed unanimously Mar. 28, that authorized Annan to administer the oil-for-aid program under which Iraqi oil sales were previously monitored (OGJ Online, Apr. 2, 2003). Declaring that the UN had broken its "contract" with Iraq, Iraqi Foreign Minister Naji Sabri said his country is under no further obligation to export any more oil under that program.

In other news, Alí Rodríguez Araque, president of Petroleos de Venezuela SA, announced eight shipments of Venezuelan crude soon would be exported to US markets, according to El Nacional newspaper in Caracas. Rodríguez said PDVSA "has been normalizing" its oil production in excess of 3 million b/d and "rapidly recovering the confidence" of former clients, prior to the general strike that virtually brought the company's operations to a stop earlier this year.

Such announcements of pending exports were not normal procedure prior to that strike. Many analysts doubt that Venezuela is producing or exporting as much oil as officials claim.

Market prices
The May contract for benchmark US sweet, light crudes dropped 66¢ to $27.96/bbl Monday on the New York Mercantile Exchange, while the June position retreated 35¢ to $26.51/bbl. Unleaded gasoline for May delivery plunged by 2.78¢ to 84.25¢/gal Monday. Heating oil for the same month lost 0.96¢ to 71.64¢/gal.

However, the May natural gas contract gained 19.1¢ to $5.13/Mcf Monday amid speculative fund buying on thin NYMEX volumes.

"A lot of buy stops were triggered when the market pushed past resistance points, and the lower volumes indicate locals were doing most of the trading," analysts reported Tuesday at Enerfax Daily. "Technical traders noted the steady erosion of prices over the last 2-3 weeks has been marked by fairly light volume and little, if any, growth in open interest, signs that sellers lacked conviction in the recent bearish trend."

They said, "Although the cash market firmed on cold weather in the upper Midwest and Northeast, the main thing moving NYMEX was short covering, leading some to consider yesterday's move as a technical rally to be sold."

In London, the May contract for North Sea Brent oil lost 10¢ to$24.58/bbl Monday on the International Petroleum exchange. The May natural gas contract dipped by 1.1¢ to the equivalent of $2.46/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 47¢ to $24.91/bbl Monday.

Contact Sam Fletcher at [email protected]