ENERGY : Oil Prices Dip as Traders Assess Course of War

Oil prices dropped for first time this week as traders pulled back in sluggish trading that seemed to reflect that the energy market has grown used to nightly bombing raids and missile attacks in the Middle East.

“We’ve had three good days, it was time for a bit of selling to come in,” one trader said.

Analysts said the selling was also fostered by the absence of dramatic developments in the Persian Gulf War, which is in its second week.

Crude oil for delivery in March closed with a loss of 33 cents at $21.71 a barrel on the New York Mercantile Exchange, snapping a three-day streak of gains of more than $5.

Unleaded gasoline for February delivery ended 0.50 cent lower at 62.60 cents a gallon, while heating oil fell 0.33 cent to 69.82 cents a gallon.

Some oil traders said crude prices had landed in a reasonable trading range, slightly higher than they might be with no war going on but far less than they were in the days when the Persian Gulf crisis seemed to pose a bigger threat to Mideast oil supplies.

Analysts said the success of the U.S. Patriot missiles at downing Iraq’s Scud missiles and reports that the war was going well for the allies encouraged the selling.

But the downside pressure was not overwhelming.

“Nobody knows what to do. A lot of people want to sell, but if you sell it and something happens in the gulf you could be completely buried. It’s keeping the volume out of the market.”

After a full week of combat, the only oil casualties appeared to have been some Kuwaiti petroleum facilities set afire by the Iraqis near the border of Saudi Arabia.

The extent of the damage was not clear. But traders weren’t alarmed because the oil had been taken out of the world market almost six months earlier when the United Nations imposed an embargo of crude from Iraq and Kuwait.

Other oil traders said it was too soon to say whether oil prices had lost the volatility that brought on wild daily swings in the months after the invasion of Kuwait. Late last week, crude fell nearly $13 per barrel in two days, while early this week, it regained about $5 per barrel in two days.

“The market’s just sitting, waiting for the next significant piece of new news,” said Randall Rothenberg, an oil broker with Dean Witter Reynolds Inc.

As crude slid, prices for refined petroleum products also weakened in New York.

Natural gas prices were mixed. For delivery in March, natural gas fell 0.3 cent to $1.382 per 1,000 cubic feet.