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Crude ends lower but mood still upbeat Saudi official tells Dow Jones that Saudi Arabia and OPEC will fill any gap in supply that could stem from a U.S. military action against Iraq by The Associated Press
Crude oil futures posted modest losses Aug. 23, as traders ended an otherwise strong week with some light profit taking. “Considering the magnitude of the run-up, yesterday and today’s selloff was modest,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
On the New York Mercantile Exchange, the front-month October crude oil futures contract slipped 21 cents to close at $28.63 a barrel.
September heating oil dropped 0.92 cent to close at 73.90 cents a gallon, while September gasoline futures fell 0.14 cent to settle at 79.52 cents a gallon.
On London’s International Petroleum Exchange, October Brent futures slid 3 cents to close at $26.99 a barrel.
Traders attributed the Aug. 23 pullback in part to reassuring comments by a Saudi official that Saudi Arabia will fill any supply shortfall caused by an attack on Iraq.
A Saudi oil official told Dow Jones Newswires that Saudi Arabia and the Organization of Petroleum Exporting Countries will fill any gap in supplies that could stem from a U.S. military action against Iraq. Saudi Arabia, OPEC’s largest producer, has more than 3 million barrels a day in spare output capacity, larger than any other producer in the world.
“Using oil as a weapon does not accomplish anything,” the official said, echoing a long-standing Saudi policy. “Having moderate oil prices, this is also in the Saudi interest.”
Concern that the U.S. has been preparing for war with Iraq helped lift crude oil prices above $30 a barrel earlier the week of Aug. 19 for the first time since May 2001.
Analysts claim $5 war premium Traders worry that a U.S.-led attack on Iraq wouldn’t only disrupt that country’s oil exports, but could potentially spread to the rest of the oil-rich Persian Gulf region. The loss of Iraqi and Kuwaiti oil supplies for several months following Iraq’s invasion of Kuwait lifted oil prices above $40 a barrel.
Some analysts say that the current price of oil reflects a war premium of more than $5 a barrel and that prices are likely to drop sharply if it becomes clear that the U.S. isn’t inclined to attack Iraq in the face of wide international opposition.
Other analysts, however, say that oil prices have been kept high by historically low inventories and uncertainty over whether OPEC will raise its output target when it meets in Osaka, Japan, on Sept. 19.
Whatever the reason for the high price of crude, market sentiment remained bullish as traders left Aug. 23 for the weekend.
“This is just a retracement in the uptrend,” Tom Bentz, an analyst at BNP Paribas Futures said of the Aug. 19 decline.
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