New York, Dec. 21 (Bloomberg) -- Crude oil fell to a 12-year
low before rebounding, as air attacks on Iraq ended over the
weekend without disrupting the nation's exports, keeping world
supplies ample at a time of slack demand.
Iraq's oil exports of about 1.8 million barrels a day, or
2.5 percent of world supply, are flowing normally after four days
of bombing by the U.S. and U.K., the Iraqi oil ministry said.
''The Iraq story is over: no exports were disrupted and
they're not likely to be,'' said Nauman Barakat, vice president
of futures investments for Prudential Securities in New York.
Crude oil for January delivery, which expired today, fell
14 cents, or 1.3 percent, to $10.81 a barrel on the New York
Mercantile Exchange, after dropping as low as $10.35, the lowest
price since 1986.
The most-active February Nymex contract fell 24 cents, or
2.1 percent, to $11.02 a barrel.
Prices bounced back from the day's lows as traders bought
back contracts that they had sold earlier in the day, said David
Becker, energy derivatives trading manager at Citibank N.A. in
New York. Also, futures contracts tend to move erratically on
expiration day, as traders buy or sell contracts to get out of
their positions.
Weak demand in Asia and copious supplies from world
producers joined to send prices down 41 percent over the past
12 months.
Brent Falls
In London, February Brent crude fell 23 cents, or 2.3
percent, to $9.75 a barrel on the International Petroleum
Exchange. Earlier in the day it dropped to $9.55 a barrel, a
record low for the 10-year-old contract.
''With very low oil prices, an awful lot of production that
was marginal (when prices were) $2-$5 higher will not be
profitable and will be shut in,'' said Raymond Plank, chairman
and founder of Houston-based Apache Corp., an independent oil and
gas producing company. ''You'll have an acceleration of failure
among the smaller companies'' and more mergers, he said.
Many of the world's largest oil companies, including Exxon
Corp., the top U.S. producer, are already engaged in merger
talks. While Apache won't be lowering its production of about
70,000 barrels a day because of current low prices, Plank said
that exploration will probably suffer.
''We will be looking to match our drilling expenditures to
lower expectations of cash flow, so there'll be curtailment. We
won't be doing as much drilling in the Gulf of Mexico as we would
otherwise,'' he said.
Returning Workers
The U.S. and U.K. attack which began Wednesday night and
lasted four days, punished Iraq for its refusal to cooperate
fully with United Nations inspectors seeking information about
weapons programs.
''We're back where we were before the situation in Iraq
began,'' said Rod Hamilton, a broker with Amerex Futures in
London. ''With Iraq out of the way I don't think there's much
keeping the market up.''
Arms inspectors and many UN humanitarian workers were
evacuated from Iraq before the strikes began. The humanitarian
workers, involved in distributing the food and medicine bought
with revenue from oil sales, will return tomorrow, the UN said.
Output cuts earlier this year by 17 of the world's major oil
producing nations haven't been enough to wipe out excess global
supply, especially as some nations haven't fully adhered to their
promised cuts. The producers pledged to cut more than 3 million
barrels a day, or 4 percent of world supply.
Iran, the world's fourth-largest producer, says it won't
recognize the output target assigned to it and wants the
Organization of Petroleum Exporting Countries to re-examine extra
production allocations given to Saudi Arabia during the Gulf War,
the Middle East Economic Survey reported today.
Iran's arguments, and excess production by another large
OPEC member, Venezuela, ''indicates that neither are being
sufficiently hurt by low prices to force them into greater
action,'' said Barakat.
Iran's Export Complaint
Iran has long said that it will make its promised 305,000
barrel-a-day cut from a baseline of 3.925 million barrels a day,
not from the 3.6 million barrels a day baseline originally
assigned to it. It produced 3.55 million barrels a day last
month, according to Bloomberg estimates.
Iran says Saudi Arabia should cut output further, giving
back the extra production it took when Iraq's invasion of Kuwait
in 1990 knocked out supplies from both countries.
While oil prices are at their lowest in more than a decade,
some analysts say the worst is over. Goldman, Sachs & Co.
investment strategist Abby Joseph Cohen told clients today in a
conference call that the decline in energy prices has ended.
January heating oil ended 0.65 cent lower at 31.74 cents a
gallon on the Nymex while January gasoline fell 0.78 cent to
33.04 cents a gallon. |
