The price of crude oil slipped Friday despite Iraq's decision to suspend exports as traders expected the gap would be filled by Saudi Arabia and US emergency reserves if necessary.
Benchmark Brent North Sea crude oil for January delivery was selling for $31.42 a barrel in late London trade, from $31.88 at the close on Thursday.
In New York, January light sweet crude was quoted at $33.48 a barrel. The market has been listening closely to noises from Baghdad, which is arguing with the United Nations over a new pricing surcharge that effectively violates the 10-year embargo on Iraq.
Iraq is a key world crude exporter. Its 2.4 million barrels a day amount to as much as five percent of global oil exports -- volumes desperately needed to cool a feverish market which has been short of oil this year. Dwindling world crude stocks have sent prices to 10-year high points in recent weeks.
But a new price spiral did not materialise on Friday, because the market had already factored in a halt in Iraqi exports and was hoping that the shortfall could be made up by supplies from elsewhere.
Saudi Arabia has pledged to step into the breach and although it will struggle to fill in the Iraqi export volumes, the United States has further vowed to dip into its strategic petroleum reserve to ensure there are no shortfalls.
"People in the market were expecting a complete halt (in Iraqi exports) from midnight last night," said Lawrence Eagles, an analyst with the GNI brokerage.
In Paris, the International Energy Agency played down the importance of the Iraqi oil cut. "This possibility has been much discussed and will come as no surprise to the market," said IEA executive director Robert Priddle in a statement.
"Major oil producers have declared their readiness to act to meet any serious shortages." Some oil-producing countries held significant stocks in Europe, the Caribbean and elsewhere, close to the major consuming regions, while Iraqi shipments took 10 to 30 days to reach their destinations, he added.
The IEA reaffirmed its readiness to take swift action, with security stocks in IEA member countries available to offset any serious breaks in supply.
A spokeswoman for Turkey's state oil and gas company, Botas, said on Friday that Iraq had cut off supplies without prior notice through the Turkish port of Ceyhan late Thursday.
Walid Khadduri, editor of the authoritative Nicosia-based Middle East Economic Survey (MEES), said that exports had also stopped from the Iraqi port of Mina-al-Bakr, completing the total export shutdown.
Khadduri predicted little effect on prices, saying that the market was thirsty for refined oil, not crude. "If it goes on for two or three weeks it will even save OPEC having to cut production," he added. The Organization of Petroleum Exporting Countries (OPEC) has been fretting for weeks about what to do with output.
Khadduri said that the export halt should be seen as part of Iraq's strategy to erode UN sanctions in force since its invasion of Kuwait 10 years ago.
Iraq had asked buyers to pay a surcharge of 50 cents a barrel into a separate account not under UN supervision, but they reportedly refused.
"Baghdad underestimated how far it could push the oil companies, which would also be answerable to the UN and at the risk of legal action," Khadduri commented.
The move coincided with the end of the latest 180-day phase of the oil-for-food programme, which allows Iraq limited exports of its oil to pay for essential supplies for its people.
Khadduri said much depended on what the UN Security Council decided with regard to the next installment of Iraq's oil-for-food programme.
"Monday and Tuesday will be interesting days to watch," he said. "There are different resolutions before the Security Council, and a compromise may be found which will satisfy Baghdad."—AFP.
©--Agence France Presse
© 2000 Mena Report (www.menareport.com)