Oil prices retreated yesterday after Israel withdrew some troops from Palestinian areas but fresh violence on the West Bank kept crude traders nervous following Iraq's Monday suspension of exports.
International benchmark Brent blend crude fell 97 US cents to $26.05 (€29.67) a barrel while US light crude stood at $25.82, down 72 cents. "The market is settling down. People are realising the market without Iraq is not such a big deal and OPEC has moved to placate," said Mr Dave Thomas, an oil analyst at Commerzbank. "But the war premium will remain in the oil price until this volatility ends," he added, referring to the political factor in the price of crude, estimated at about $6.
Dealers said speculators who had recently run up large long positions on New York and London futures exchanges, betting that prices would rise, were pocketing some profits. Mr David Cumming, head of UK equities at Standard Life, expects oil prices to drop to between $20-$23 once Middle East tensions ease and the war premium fades.
Iraqi President Saddam Hussein announced that Baghdad had stopped international oil exports for a month and wanted to see an unconditional withdrawal of all Israeli troops.
Supply shortage fears eased after Monday's initial sharp reaction to the Iraqi outage, with OPEC powerhouse Saudi Arabia saying it would not allow a shortage of crude. Saudi Oil Minister Mr Ali al-Naimi was quoted in Saudi newspapers as saying the kingdom would ensure global supplies. "I believe there is no threat to the reliability of worldwide oil supplies, and the reliability of Saudi Arabian supplies in particular," he was quoted as saying. For now, OPEC ministers have decided against raising supplies, said OPEC Secretary-General Mr Ali Rodriguez. The cartel would keep a close watch on developments, he said.
Iraq sells about two million barrels daily on the international market, accounting for 4 per cent of world oil trade. OPEC has more than five million bpd of spare capacity. Fresh violence in the Middle East left markets jittery. Sharp supply cuts from Venezuela, hit by a strike at the state oil firm, also left the market on edge. - (Reuters)
