The price of oil slouched below $30 a barrel on Tuesday at levels last seen almost four months ago, as the market began to believe that there will be enough crude available to satisfy demand this winter.
Market players were anticipating an end to a five-day Iraqi export freeze and firmly expected sufficient volumes of crude to be supplied from other sources even if Baghdad did stick to its guns in a long-running dispute with the United Nations over oil pricing and payments.
As a result, a market that has been alarmed at the prospect of a crude shortage this winter now believes that there may not be an energy crisis after all, analysts said.
The result was to peg the price of oil down sharply. In London, the benchmark Brent North Sea reference crude for January delivery opened at $29.45 a barrel, and moved sideways all morning.
Oil prices last opened this low on August 8, and apart from a brief dip in early October, have persisted above $30 ever since, even hitting 10-year high points above $35 at one point, amid a series of supply shock worries.
The latest involved Iraq, which last week suspended exports amid a spat with the United Nations over pricing and payment. Baghdad was peeved that the United Nations would not allow it to levy a surcharge on crude exports and channel the proceeds into accounts outside UN control.
Iraq is a key world exporter of crude. Its 2.4 million barrels a day amount to as much as five percent of global oil exports -- a significant volume of crude for a market already at risk of shortages as winter starts to bite.
But experts noted on Tuesday that Iraq was still pumping crude to its main export terminal in southern Turkey, and few expect the export brinkmanship to last long.
Even if it does, market players now firmly expect the crude shortfall to be filled from other sources, notably Saudi Arabia and the US strategic petroleum reserve (SPR).
"There is a growing confidence that either the Iraqi situation is going to be very short-lived or you're going to get oil release from the SPR very swiftly," said Lawrence Eagles, an expert with the GNI brokerage.
"Once that confidence has come into the market a lot of speculators, who have been banking on an Iraqi disruption causing another surge in oil prices, ... have just been bailing out of their positions," he told AFP.
Signs of the downtrend were also evident in New York, where a barrel of light sweet crude for January delivery closed Monday's session down 80 cents at $31.22.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)