COMMODITIES Tuesday, July 21, 1987 : Oil Futures Prices Retreat

Energy futures prices retreated sharply Tuesday as traders reassessed the dangers associated with reflagging Kuwaiti vessels in the Persian Gulf.

Analysts said fears seem to be abating that the U.S. moves to protect oil shipping in the gulf will lead to a widening of the Iran-Iraq war.

On other markets, grain and soybeans futures were lower; pork bellies advanced but livestock futures were lower; and precious metals moved higher.

For the past several weeks, energy futures at the New York Mercantile Exchange have been moving higher because of deepening tensions in the Middle East.

“They’ve been buying in anticipation of fireworks in the Persian Gulf,” said Peter Beutel, an analyst in New York with Elders Futures Inc. “But now that the reflagging is actually upon us, it doesn’t appear as explosive as people thought at first.”

The theory now, he said, is that in the past Iran has not launched unprovoked attacks on shipping, but retaliated after Iraqi attacks.

“So there’s very little reason to think Iran will attack first now,” he said.