Crude Oil Prices Go Into a Tailspin : Market: Traders appear less frightened that Iraq might send its army toward Saudi Arabian oil fields.

Crude oil prices went into a tailspin today in a market less frightened that Iraq might send its army toward Saudi Arabian oil fields after President Bush ordered U.S. combat troops to defend Saudi Arabia.

In lively midday trading on the New York Mercantile Exchange, spot crude oil sank $1.51 to $26.80 a barrel, in the first major drop after four days of quickly rising prices as a result of last Thursday’s Iraqi invasion of Kuwait.

On Tuesday, spot crude oil closed at a 4 1/2-year high of $28.31 a barrel, having climbed 33% from pre-invasion levels. In June, West Texas Intermediate crude, the U.S. benchmark, traded at $15 a barrel.

The spot price of NYMEX unleaded gasoline tumbled 4.09 cents to 78.30 cents a gallon today.

Overseas, cargoes of the world benchmark crude oil, Brent Blend from the North Sea for September loading, slumped to $25.80 a barrel from Tuesday’s $26.55.

Analysts said the U.S. troop deployment has cooled the heated market concern among traders that Iraq might launch an attack against Saudi Arabian oil facilities, which produce about 20% of OPEC’s oil.

Analysts said the tailspin in oil prices was also ignited by reports that OPEC nations, including Saudi Arabia, may be ready to make up for any oil from Iraq and Iraqi-held Kuwait that is blocked from world markets by U.N. sanctions.

But leading OPEC member Iran denied that the group will raise output to make up any shortfall in Western supplies.

A senior U.S. official quoted Venezuelan President Carlos Andres Perez as telling U.S. Vice President Dan Quayle that Venezuela and other members of the Organization of Petroleum Exporting Countries have agreed that “rampant price fluctuations were not good for anyone.” OPEC will try to see that oil is sold as close as possible to its target price of $21, the official said. Analysts said up to 3.5 million barrels of extra OPEC capacity may be available, of which 2 million is in Saudi Arabia.

In a related development, officials of major Western nations will meet Thursday in Paris at the 21-member International Energy Agency, the West’s energy “watchdog” created after the 1973 Arab oil embargo.

The IEA can ask members to curb demand or draw on stocks. It can impose compulsory oil-sharing if supply falls 7% below normal in the whole IEA area or individual states, although this has never been tried.