Oil prices deepened a week-long plunge yesterday as US and British forces captured key Iraqi oilfields and ports intact, calming market fears of widespread destruction by Iraqi troops.
A big wave of extra OPEC oil arriving in the West, replacing supply lost from war-torn Iraq, also helped ease the threat of shortages.
Benchmark Brent crude oil futures fell $1.30 to $24.20 per barrel by evening in London, having hit a four-month low of $24.00. US crude also plumbed fresh four-month lows, down $1.37 cents to $26.75.
The value of oil has dropped by 30 per cent in a week, having peaked at $35-$40 last month.
"The capture of key oil facilities intact is adding to bearish sentiment," said Mr Tony Machacek, a broker at Prudential-Bache International.
British defence chief Sir Michael Boyce said all key components of the southern Iraqi oilfields, which normally pump half the country's output, had been secured. British troops also captured Iraq's Faw peninsula on the Gulf, a strategic oil export route.
OPEC exporters, especially Saudi Arabia, have hiked output over the past few months, first to cover a strike in Venezuela and then to cool a price spike fuelled by war fears.
Imports of oil in the United States are rising despite the cutoff in Iraqi supplies. US Energy Secretary Mr Spencer Abraham said OPEC output was now in line with its total level last November despite shortfalls from Iraq, Venezuela and Nigeria.
Brokers said investors were selling positions built up on futures markets when US crude rallied to a 12-year peak close to $40 in late February.
"The market has now moved from a war premium to a victory discount," said oil analyst Mr Simon Games-Thomas.
So far Gulf states near Iraq have reported no disruptions to oil production, nor any disturbances to tanker movements in the Gulf, which is the artery for 40 per cent of world oil exports.
Iraq's neighbour Kuwait said it cut throughput at its refineries as a precautionary move after a near miss by two Iraqi missiles on Thursday.
