Key Oil Prices Drop as Jitters Over Gulf Ease : Slide Begins in London, Spreads to U.S. Markets
Oil prices fell back slightly Tuesday as the market sought more comfortable ranges for crude and refined products, given its recent anxieties over the Persian Gulf conflict and OPEC overproduction.
In the Persian Gulf, Iraq and Iran continued to press their latest round of fighting. But oil traders apparently did not find the developments as worrisome as they did Monday, when concern that the warfare might restrict supplies drove prices higher.
On the New York Mercantile Exchange, contracts for October delivery of West Texas Intermediate, the benchmark U.S. crude, closed at $19.63, down 10 cents.
Contracts for September delivery of refined products also moved lower, with wholesale unleaded gasoline closing at 49.80 cents per gallon, down 0.46 cent, and wholesale heating oil at 52.23 cents per gallon, down 0.13 cent.
“We’ve basically reached an equilibrium point, where the market has digested everything it knows, and everything it thinks might happen,” said Jayne Ball, an oil broker at Dean Witter Reynolds.
Drop Understandable
She was referring to s worries over the Persian Gulf hostilities and reports that members of the Organization of Petroleum Exporting Countries have been producing more oil than world markets need.
All that considered, “we’re well priced, fundamentally,” she said.
“If you take the official $18-per-barrel OPEC price, add on $1.25 to $1.40 for shipping, that’s justified. Then, the threat of war interrupting supplies justifies another quarter. So right around these numbers? Not bad,” she said.
Bob Baker, an analyst at Prudential-Bache Securities, suggested that the day’s slippage was understandable, with “the $19.25 to $19.50 band . . . a stable platform for crude.”
He said no particular news event was responsible for the day’s declines, but rather that the market probably had been influenced by an earlier slide in London, where prices fell about 15 cents per barrel for North Sea Brent, the mainstay European crude grade, as that market returned from a three-day holiday weekend.
Tuesday’s trading came amid new claims by Iraq that it had bombed two Iranian cities, following weekend attacks on Iranian oil facilities and tankers carrying Iranian oil. The attacks broke an informal monthlong cease-fire that the countries had observed.
Iran, meanwhile, said it downed three Iraqi jets and warned Iraqi civilians to stay away from economic and industrial sites across Iraq to elude retaliatory attacks. This came after an Iranian speedboat attacked a Kuwaiti-flagged freighter Monday.
After peaking at $22.39 on July 17, prices went into a sharp decline, losing about $4 a barrel in response to reports that OPEC was exceeding its production quotas.
