ENERGY : Oil Drops $1.81 to Lowest Close Since October

Oil prices dropped to their lowest level in nearly a month Tuesday after President Bush was unable to get the crucial backing of the Soviet Union for a United Nations initiative to use military force against Iraq.

Crude oil for delivery in January closed with a substantial loss of $1.81 at $28.91 a barrel on the New York Mercantile Exchange (NYMEX). It was the lowest close for the benchmark contract since Oct. 23.

The December crude contract expired Monday on the NYMEX at $31.50 a barrel.

Other oil products also sank Tuesday, with unleaded gasoline for December delivery ending 2.89 cents lower at 77.47 cents a gallon and heating oil tumbling 2.31 cents to 84.45 cents a gallon.

U.N. Security Council members in Paris discussed a resolution Tuesday that would authorize war against Iraq, but a source close to the talks said the Soviet Union and France did not want to completely endorse Washington’s plan.

Oil traders said price swings were exaggerated by thin volume ahead of the holiday closing Thursday for Thanksgiving.

Separately, the American Automobile Assn. reported Tuesday that the average price of regular-unleaded gasoline sold nationwide fell by 2.6 cents to $1.359 a gallon in the past week--just in time to provide a little relief for holiday drivers.

The dip in price, which more than offset a slight increase of 0.8 cent a gallon reported last week, was felt in all parts of the country, with the exception of the Mid-Atlantic region, where the price rose slightly, AAA said.

The average price of regular unleaded gasoline sold at self-service pumps currently is 28.4 cents a gallon above the price recorded on Aug. 1, the day before Iraq seized Kuwait and triggered the Persian Gulf crisis, AAA said.

In another development, the nation’s supplies of crude oil last week dipped sharply below the same week a year earlier, when stocks were rising, the American Petroleum Institute reported.

For the week ended Nov. 16, the weekly oil industry survey found that crude oil inventories slipped by 4.2 million barrels to 341.2 million from 345.4 million the prior week--7.7 million barrels below year-ago levels of 348.9 million.

U.S. crude supplies fell below year-ago levels in late October for the first time this year as Middle East imports dropped after Iraq’s Aug. 2 invasion of Kuwait and the U.N. embargo subsequently placed on Iraqi and Kuwaiti exports.

In an unrelated development, Mana Said Oteiba, one of the longest serving oil ministers in the Organization of Petroleum Exporting Countries, was replaced in a cabinet reshuffle in the United Arab Emirates.

Oteiba was replaced as minister of petroleum and mineral wealth by the little-known Yousef bin Omeir bin Yousef.