Oil Prices Surge, Then Retreat After Attack Begins : Energy: Some oil firms freeze gasoline prices to thwart panic buying, while the President ordered the first drawdown of the Strategic Petroleum Reserve.

As the first bombs fell on Baghdad, the reaction in oil markets worldwide was swift and dramatic Wednesday evening, with prices rising as much as $6 a barrel within minutes of the first news reports, then falling rapidly, in some cases below pre-attack levels, traders said.

Prices fell as traders believed that allied forces had scored a major blow to Iraq and diminished the threat of disrupted oil supplies--at least for now.

Prices also plummeted on news that President Bush had ordered a 1.125-million-barrel drawdown of the 586-million-barrel Strategic Petroleum Reserve, the first time in history that the reserve has been tapped.

Meanwhile, in an effort to forestall panic buying by jittery motorists, several major oil companies announced indefinite freezes of wholesale prices of gasoline sold to retail dealers and wholesale distributors, and called on service stations to follow suit.

Oil industry officials warned consumers not to rush to top off fuel tanks. “We urge our customers to avoid panic buying or fuel hoarding here at home that could create a supply-demand imbalance in the market,” said Unocal Chairman Richard J. Stegemeier in a statement.

It was unclear whether motorists would heed the warning: One driver reported gas lines forming Wednesday night at several service stations in West Los Angeles.

After surging as high as $38 a barrel, oil prices dropped off in domestic spot markets and on overseas exchanges within hours of the initial attack, bringing them within $1 a barrel of the $32-a-barrel closing price on the New York Mercantile Exchange, where futures trading ceased hours before the war broke out.

On some spot markets here and overseas, crude traded below the $32 level, said Thomas P. Blakeslee, an energy analyst with Pegasus Econometric Group Inc. in Hoboken, N.J.

“The initial surge was the worst, but it’s been proven so far by all the reports that we’ve hit the Iraqis so badly that they can’t hit anything in Saudi Arabia, and that was the biggest fear,” said Randall Rothenberg, an oil trader with Dean Witter in New York, who dragged himself back into the office Wednesday night to monitor the turbulent oil markets after fighting broke out.

North Sea Brent crude, a main international benchmark, soared in early Singapore trading as much as $4.30 to $33.50 a barrel, but fell back as low as $28 a barrel. Brent was trading at $29.20 a barrel in New York before the outbreak of fighting.

Light sweet crude oil for March delivery was trading as high as $33.75 per barrel in Tokyo, up $3.46 from its closing in New York late Wednesday, Associated Press reported. Traders said prices retreated after rising by about $4 a barrel.

The outbreak of fighting caught oil traders by surprise, coming so long after the closing of the New York Mercantile Exchange, the world’s biggest oil market, but roller-coaster trading ensued on after-hours U.S. cash markets.

In those markets, traders reported that West Texas Intermediate crude oil, the U.S. benchmark grade, for February delivery was sold for $3 to $6 a barrel above its NYMEX close of $32 a barrel.

On the West Coast, where trading continued as the first news reports came in, Alaska North Slope crude oil was trading up about $5 at $32 a barrel, and West Texas Intermediate at about $38 a barrel, said Roger Beach, president of Unocal Corp.’s refining and marketing division.

By late Wednesday night, however, prices had fallen nearly even with pre-attack levels, Blakeslee said.

When the NYMEX opens today, traders doubted that crude oil will rise by the exchange-imposed limit of $7.50 a barrel that would trigger a one-hour cessation in trading. Under new rules, prices for near-month contracts can rise no more than $15 a barrel in a day.

Mobil Corp., Unocal Corp., Chevron Corp., Amoco Oil Co., Conoco Inc., Shell Oil Co. and Atlantic Richfield Co. all said they would freeze prices of wholesale gasoline and other refined products, and other oil companies were expected to follow. They called on dealers, many of whom are independent retailers, to follow suit.