Oil Prices Drop on Iraq’s Offer, Then Rebound

World oil prices gyrated wildly today, plunging on initial reports that Iraq would pull out of Kuwait but then gaining on a White House statement that Iraq was offering little promise for peace.

“It’s way too early to say how the market will take the Iraqi move,” Susan Hammargren of Geldermann Inc. said.

“Washington has downplayed the offer, and we’ll have to wait and see what comes out by the end of the day,” she said.

In cautious early trading on the New York Mercantile Exchange, oil for delivery in March lost $1.02 to trade at $21.30 a barrel before climbing back to $21.70.

Oil products also fell, with unleaded gasoline for March delivery down 1.59 cents at 60.00 cents a gallon and heating oil off 2.60 cents at 63.40 cents a gallon.

“We are coming back here, but I’m not sure how much buying will come in,” said Tom Bentz, director of trading at United Energy.

Robert Baker, oil analyst at Prudential-Bache, said the market was a bit lower because crude supplies remained ample and continue to weigh on prices.

In London, the price of Brent crude oil for April delivery tumbled by $2.49 to $16.30 a barrel on first news of the Iraqi announcement, but then recovered to around $17.40.

“Everyone just tried to sell on the headline,” one trader said of the market’s initial reaction.