Oil experts warn of oil price spikes after raids
By David Brinkerhoff
LOS ANGELES, Dec 16 (Reuters) - Oil experts warned on Wednesday petroleum prices could soar if the bombing of Iraq prompts the Middle Eastern producer to cut off its exports of 1.8 million barrels per day, 3 percent of daily world supply.
The bombing followed the close of oil trading on the New York Mercantile Exchange (NYMEX), so it was unclear what its effect would be on major oil markets. But in a hint of what could be coming, prices rose modestly amid frenzied trading on the after-hours ACCESS market.
And it was also unclear whether Iraq would act on an earlier threat to cut off exports if it was bombed. Iraq was once of the world's biggest oil producers, but a series of U.N. sanctions after the Gulf War in 1991 has forced it to cut back the amount of oil it can market.
''People are not certain that Iraqi sales have been stopped yet,'' said Peter Beutel, an analyst with Cameron Hanover Inc.
''But there's a very good chance it'll happen, and then it will have a bullish effect,'' Beutel continued, referring to an increase in prices on what has been one of the hardest hit commodities worldwide. Prices for a barrel of oil are at 12-year lows.
Beutel said current prices of about $12.38 a barrel could rise to $15 initially and jump even higher if a Thursday meeting of major producers in Madrid signals a decision to cut back on production.
Experts say Iraqi exports are an important part of the worldwide oil glut that has driven markets lower.
President Bill Clinton ordered ''strong, sustained'' air strikes against Iraq on Wednesday, a day after the chief U.N. weapons inspector reported that Baghdad had repeatedly blocked inspectors from carrying out their mandate to monitor Iraq for evidence of secret weapons programs.
Traders said there had been near-record volumes of business on NYMEX's after-hours ACCESS system, which opened before the bombing began. But they noted that prices on ACCESS had remained stable.
Earlier, oil futures prices on NYMEX jumped by more than $1 a barrel during the day, hitting a peak of $12.60 for January deliveries before declining as markets anticipated military action against Iraq.
There are other pressures on the market besides the Iraq bombing that could boost prices. Prices could rise if a scheduled meeting of three key oil producers in Madrid on Thursday results in an agreement to cut production in Saudi Arabia, Mexico and Venezuela.
The three nations have led a series of output cuts by producers, who pledged earlier this year to bring down the global supply by 4 percent. Traders hoped the Madrid gathering would produce further production cuts.
''There's potential for an awful lot of volatility,'' Beutel said. ''We've got an awful lot on the line over the next few days.''
But some traders said they were unsure whether a halt in Iraqi exports would boost prices. They said producers could take advantage of any brief spike in prices to increase production and profit from the rally.
''If the West is just (bombing) to rap (Iraqi President Saddam Hussein's) hand and then let him back into the market, then it's a pretty short-term effect,'' one Houston-based analyst said.
''All of those countries that agreed to cut back could probably bring on more production and be happy to do so, especially if the price goes higher,'' he said. |
