The price of oil fell here Tuesday but the market remained cautious as Israeli and Palestinian leaders flew home to sell the Sharm El-Sheikh agreement to their people.
Benchmark Brent North Sea crude oil for December delivery bounced around 31 dollars a barrel before falling to 30.68 dollars from 30.88 dollars at the close Monday after the market had digested news of an agreement to end Israeli-Palestinian violence and return to the faltering peace process.
In New York, the November contract for light sweet crude fell back to 32.60 dollars from 32.92 at the close on Monday.
The market gave a muted reaction initially to news from US President Clinton 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 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 amid market concerns that the conflict would result in a repetition of the 1973 oil embargo by regional Arab nations.
Analysts said that although the Sharm El-Sheikh commitment had reduced the likelihood that other Arab Gulf Nations would become embroiled in conflict, the market remained on alert: it was not yet clear whether the Palestinian and Israeli leaders would succeed in selling the deal to their people.
"We have to wait for the reaction of Palestinians," 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."
Deutsche Bank analyst Nick Bennenbroek said there was still "some sense of unease" in the Middle East. "The markets are probably still going to be waiting for further developments to see if there's a renewed flare up ... and to see what the reaction of the people is going to be," he said.
But Bennenbroek thought the Gulf Arab nations would be unlikely to withhold oil in support of the Palestinians.
"I think there's some interest on the part of the producers to try to prevent as much as possible prices moving sharply higher."
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 told Tuesday's edition of the Iranian Hambastigi paper.
Underneath the froth added to prices by the conflict in the Middle East, the market remained tight, analysts said. A drop in temparature would put upward pressure on oil prices that have surged to 10-year highs in recent weeks.
The market was waiting for figures from the American Petroleum Institute (API) due later in the day for the latest snapshot on US crude oil stock levels.
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)