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Oil prices decline; markets still packed with fear Chavez retains presidency of Venezuela with 58 percent of vote; but there is still unrest in Iraq, concern about Yukos in Russia Brad Foss Associated Press Business Writer
Oil prices fell Aug. 16 after the president of Venezuela survived a recall referendum, though fears of potential supply interruptions in other parts of the world kept futures above $46 a barrel. Light crude for September delivery fell 46 cents to $46.12 per barrel in Aug. 16 afternoon trading on the New York Mercantile Exchange.
The vote in Venezuela, the world’s fifth-largest oil exporter, had been one of a slew of factors driving prices higher in recent weeks and so traders said the Aug. 16 decline could be short-lived.
The concern in Venezuela was that if the opposition had won there would have been a major overhaul of the state-run oil company, Petroleos de Venezuela S.A., and production would have suffered. But President Hugo Chavez had 58 percent of the vote after 94 percent of the votes had been counted.
“It means oil supplies are not in as much danger as people were thinking,” said Agbeli Ameko, managing partner at the Denver-based energy research firm Enercast.com. Signs of trouble elsewhere Elsewhere, though, there are still signs of trouble, including unrest in Iraq and the battle by Russian oil giant Yukos to stave off bankruptcy. These uncertainties have fueled worries that oil supplies could be cut off at a time when demand is robust. Moreover, market watchers say there’s little spare output capacity in the world to make up for shortfalls.
On Aug. 13, Nymex crude futures closed at an all-time high of $46.58. On an inflation-adjusted basis, though, oil is still about $11 below the price leading up to the first Gulf War.
Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, said the market is still nervous about the possibility of attacks against oil infrastructure in the Middle East, particularly in Saudi Arabia, where oil workers were attacked by terrorists in May and June.
He said large institutional investors were helping to push prices higher by “buying futures in oil to protect against that type of event,” which would likely cause stock prices to tumble.
In London, September Brent crude settled down 21 cents at $43.67 a barrel on London’s International Petroleum Exchange. The referendum in Venezuela followed a two-year drive to oust Chavez, which included a short-lived 2002 coup, a two-month strike and political riots last March that claimed a dozen lives.
Regardless of the outcome in Venezuela, traders remain wary of continuing unrest in Iraq, where journalists were ordered Aug. 16 to leave the holy city of Najaf after talks between the Iraqi interim government and forces loyal to radical Shiite cleric Muqtada al-Sadr broke down.
Two weeks of continuous fighting have put crude pipelines at risk there, traders said, as militants threaten more attacks on the vital infrastructure. Iraq produces around 1.7 million barrels per day, or about 2 percent of the world’s daily supply.
Energy markets have also been jittery amid fears of more terror attacks in Saudi Arabia — the world’s number-one producer — and simmering civil unrest in Nigeria, which is the lead producer in Africa.
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