Oil prices ease as Middle East summit reaches agreement
The price of oil slipped here on Tuesday after the Sharm El-Sheikh summit had ended with a commitment to cease Israeli-Palestinian violence and return to the faltering peace process.
The price of benchmark Brent North Sea crude oil for December delivery was 30.92 dollars a barrel, having risen as high as 31.58 dollars earlier in the day.
The crude price had fallen to 30.80 dollars a barrel, below Monday's closing level of 30.88 dollars, after US President Bill Clinton had said that the crucial Middle East summit had reached an agreement "to ensure an end to violence, maintain calm, ensure security in the (Palestinian) territories".
Clinton said that the United States and the United Nations would set up a fact-finding committee on the events of recent weeks.
Prices surged upwards last week amid an escalation of violence between the Israelis and the Palestinians because the market had been concerned that the conflict would result in a repetition of the 1973 oil embargo by regional Arab nations.
But although the agreement appeared to take some of the froth off prices that had been added by concerns that other Arab Gulf nations would be drawn into the dispute, analysts said that the market remained cautious.
”We have to wait for the reaction of Palestinians" to the agreement, said GNI analyst Lawrence Eagles. "If the Palestinians don't have a good reaction, it will affect the prices. But if the reaction is good, oil prices could go under 30 dollars."
Eagles said that although the deal had reduced the threat of an embargo on oil supplies by Arab Gulf states, "we have to be a little bit cautious."
A warning from the world's biggest producer, Saudi Arabia, last week that Gulf Arab states would not stand by while Israel made "the slightest intolerable step" against the Palestinians lingered over the market.
But Iran sought to allay fears on Monday that Arab Gulf states might place an embargo on oil in support of the Palestinians. The Organisation of Petroleum Exporting Countries (OPEC) has no plans to "punish" supporters of Israel by lowering exports to the West, Iranian OPEC representative Hossein Kazempour Ardebili said in the Iranian Hambastigi paper on Tuesday.
Oil prices had climbed in initial trading after a sharp falls on Monday, which were prompted by hopes of a Middle East deal as well as reduced demand for heating oil owing to warmer weather in the United States.
Prices have spiralled in recent weeks to 10-year high points above 35 dollars a barrel amid fears that low crude stock levels will be insufficient to match demand in the coming months, particularly if the northern hemisphere winter is cold.
Prudential Bache analyst Mark Keenan said that the market would remain cautious ahead of figures on US crude oil stock levels from the American Petroleum Institute (API) due later in the day.
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)