Hey Slider, The Sheik knows?
``The Iraqis are going to push the price so high that the
U.S. and Britain are going to have to give in,' said Bill
O'Grady, director of fundamental futures research at A.G. Edwards
& Sons in St. Louis.
The plot thickens <VBG>:
------------------------------------------------------------
quote.bloomberg.com
Bloomberg Energy
Mon, 22 Nov 1999, 5:02pm EST
11/22 16:29 Crude Oil Rises to Highest Since Gulf War on Concern of Iraqi Export Halt
By Stephen Voss
Crude Oil Rises After Iraq Rejects Extension of Export Accord
New York, Nov. 22 (Bloomberg) -- Crude oil surged more than
3 percent to a post-Persian Gulf War high above $27 a barrel
after reports that Iraq halted oil shipments and rejected a
United Nations plan to extend an export agreement for two weeks.
Iraq, which normally exports about 3 percent of the world's
oil, is seeking an end to economic sanctions, including UN
control over its oil exports. The UN plan to extend the program
temporarily came after Russia and the U.S. were unable to agree
on terms of a new six-month plan.
``Thirty-dollar oil looks real if this suspension
continues,' said Nauman Barakat, vice president of global energy
trading at ABN Amro Inc. in New York. Iraqi president Saddam
Hussein probably isn't ``going to agree to the extension of the
present oil-for-food sales without any changes, so my assumption
is that the suspension is going to be here for a while.'
Crude oil for January delivery rose 93 cents, or 3.6
percent, to $27.07 a barrel on the New York Mercantile Exchange,
the highest closing price since January 1991.
In London, crude oil for January settlement rose 71 cents,
or 2.8 percent, to $25.78 a barrel on the International Petroleum
Exchange.
Oil prices have more than doubled this year as OPEC member
nations and other exporters have limited supplies. That's helped
send the Goldman Sachs Commodities Index, which is weighted
toward energy markets, up 50 percent this year.
Uncharted Territory
Traders who base buy and sell decisions on charts and graphs
of past prices are finding little guidance from a crude oil
market that's soared 23 percent this month.
``You're in uncharted territory, we've blown through all the
price points,' said Dale Wong, an oil trader at NationsBanc in
Houston. Technical traders must make do with ``very little data,
other than long-term trends going back to the Gulf War,' he
said.
From a technical standpoint, closing today above $27 was a
major psychological breakthrough, he said.
Baghdad has halted exports from its pipeline through Turkey
and is expected to complete tanker loadings at its own port
tomorrow in the Persian Gulf, after refusing over the weekend to
sign the two-week extension, according to the UN.
Iraqi oil exports were put under an international embargo
after Iraq invaded Kuwait in 1990. The UN, since late 1996, has
allowed Iraq to export limited mounts of oil to buy food and
medical supplies, and to pay war reparations.
Iraqi oil ministry officials told foreign oil companies
operating in the country that new directives were about to be
issued, Agence France-Presse reported. The UN's Iraq Program in
New York had no new information on the status of oil exports.
Extended on Friday
The current six-month round of the UN-sponsored program was
to have expired Saturday, but was extended Friday for two weeks
to allow the Security Council more time to discuss its renewal
and longer-term policy regarding sanctions and weapons
inspections.
Oil prices rallied this year after Organization of Petroleum
Exporting Countries members and several other producers cut world
supply by about 7 percent from February 1998 levels in a bid to
eliminate a glut and raise prices.
An extended halt in Iraqi exports would also come amid
rising demand for winter fuel in the Northern hemisphere and U.S.
crude inventories close to their lowest level in two years. A
surge in energy prices could accelerate global inflation,
analysts said.
The average retail price of regular gasoline in the U.S. was
$1.282 this month, up 22 percent from a year ago, the American
Automobile Association said last week. Even so, the AAA expects a
record number of U.S. travelers for the Thanksgiving holiday
this week.
``The Iraqis are going to push the price so high that the
U.S. and Britain are going to have to give in,' said Bill
O'Grady, director of fundamental futures research at A.G. Edwards
& Sons in St. Louis. By opposing Iraq, the U.S. and U.K. ``are
going risk their continued economic expansion.'
To combat any shortfall from a prolonged delay in Iraqi
exports, it's possible that either the U.S. would release oil
from its Strategic Petroleum Reserve, or OPEC would boost its oil
production levels, Barakat said.
Asked whether the U.S. would release oil from the reserves
because of the recent rally, Energy Secretary Bill Richardson
told reporters that the SPR exists for national emergencies.
``We think that the market should dictate SPR levels.'
Crude oil traders were also watching reports that the
Nigerian government sent soldiers into the oil-producing Niger
delta region to quell civil unrest that has disrupted oil
production.
Nigerian oil output by the Royal Dutch/Shell Group and other
companies has been dogged by violence in the Niger delta for
months because local communities are demanding a bigger share of
the country's oil wealth.
``Nigeria wouldn't have mattered a lot seven or eight months
ago but, like Iraq, this is a factor that could accelerate the
decline in inventories,' Jurjen Lunshof, an analyst at Credit
Lyonnais Securities in London.
Gasoline for December delivery on the Nymex rose 2.62 cents,
or 3.6 percent, to 75.77 cents a gallon, the highest closing
price since April 1996. The December heating oil contract gained
1.38 cents, or 2 percent, to 69.43 cents a gallon, the highest
closing price since January 1997.
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