IMPACT OF THE GULF WAR : Secure in Supplies, Traders Push Oil to a 6-Month Low
With a dramatic drop at the end of the trading day, oil prices fell more than $2 Friday to $19.25 a barrel--the lowest level in six months--as mercurial oil traders gained new confidence in the security of Middle East petroleum supplies.
Many traders said even the most unsettling development--for instance, Israel’s entry into the war and the ensuing breakup of the U.S.-led coalition--would not send oil prices skyrocketing, because the market is once again focused on the fact that there is an ample supply of oil worldwide.
“If Israel gets thrown into this conflict more than it is, we’ll see the market rally $3 or $4, but I don’t think much more than that,” said Peter C. Beutel of Pegasus Econometric Group, a Hoboken, N.J., commodities consulting firm. “We’ve left the psychological market--not completely, but enough that we can look at supply and demand again.”
The price for light sweet crude to be delivered in February dropped $2.19 a barrel Friday. That ended a volatile, war-jittery week of price changes highlighted by Thursday’s record dive of $10.56 a barrel.
Some oil companies lowered their gasoline prices to dealers Friday, while others maintained a freeze adopted earlier in the week, when prices were expected to rise.
For instance, Los Angeles-based Atlantic Richfield Co. lowered dealers’ costs by 3 to 5 cents a gallon. Harry Johnson, Arco manager of marketing pricing, expected retail prices for unleaded gasoline of $1.10 to $1.11 a gallon as a result.
Chevron Corp. also said it would lower wholesale prices.
Most of the day Friday the oil market was relatively stable--”licking its wounds,” as one analyst put it--after Thursday’s unexpected drop.
Although some traders worried that Israel would enter the fight, endangering oil supplies in a spreading conflict, most discounted the effect Israeli military action might have.
The more widespread concern, which lessened as the day wore on, was that Iraq could threaten the Saudi Arabian oil fields.
As news of new attacks on Israel turned out to be false alarms, calm prevailed and prices fell.
The steep plummet in the last 10 minutes of trading was blamed by most analysts on traders who were holding futures at $30 a barrel or more. Such traders realized that the market wouldn’t turn around, analysts said, and they speculated that continued allied success in the war could bring it to an end as early as this weekend.
Most analysts, however, saw the market settling down.
“I think the price at $19.25 is more in line with the long-term underlying supply and demand fundamentals than any price we’ve seen in the last six months,” said Thomas G. Burns, manager of economics for Chevron Corp.
Markets: The Week That Was How key stock, bond and commodity investments fared this week as the United States and its allies went to war with Iraq.
U.S.Stocks Jan.11 Jan.18 Change Dow Industrials up 2,501.49 2,646.78 +5.8% S&P; 500 up 315.23 332.23 +5.4% Wilshire 5,000 up 2,969.53 3,107.56 +4.6% OTC Composite up 361.80 376.99 +4.2%
Foreign Stocks Jan.11 Jan.18 Change Tokyo: Nikkei 225 up 23,241.02 23,808.30 +2.4% Frankfurt: Dax 30 up 1,382.26 1,405.06 +1.6% Toronto: TSE 300 up 3,183.59 3,210.50 +0.8% London: FTSE 1000 down 2,106.10 2,102.70 -0.2%
Bonds/Money Market Rates Jan.11 Jan.18 Change 30-Year T-Bond down 8.36% 8.17% -0.19 pts 7-Year T-Note down 8.04% 7.92% -0.12 pts 3-Month T-Bill down 6.16% 6.09% -0.07 pts
Commodities Jan.11 Jan.18 Change CRB Futures Index down 219.60 216.70 -1.3% Silver (Comex) down $4.12/oz $3.98 -3.4% Gold (Comex) down $391.60/oz $374.20 -4.4% Oil (N.Y.Merc) down $27.29/bar. $19.25 -29.5%
