Oil prices fell sharply Thursday, closing below $19 a barrel in New York, and continued falling further in Tokyo early Friday as traders reacted first to expectations of an imminent ground war in the Gulf and later to Iraq's positive response to a Soviet peace proposal.
In reaction to Iraq saying it conditionally embraced the Soviet proposal, traders in Tokyo early Friday drove down the price of a barrel of U.S. light sweet crude oil to be delivered in April to $18, 50 cents below its New York closing.
On the New York Mercantile Exchange Thursday, a barrel of light sweet crude fell $1.05 to $18.50 as traders worried that hostilities would send prices plunging, as they did unexpectedly after allied forces launched their assault against Iraq last month.
The New York markets were closed when Moscow said Iraq had reacted favorably to a proposal calling for Iraq to start the withdrawal of its troops from Kuwait two days after a cease-fire. White House spokesman Marlin Fitzwater said President Bush had "serious concerns" about the Soviet peace plan and would consult U.S. allies before responding.
Traders in Tokyo were skeptical, however, that the U.S. would agree to a cease-fire spelled out under the Soviet proposal. Even so, oil industry analysts expect prices to continue falling in the days ahead, on the assumption that a U.S.-led ground offensive against Iraqi forces in Kuwait would be swift and successful.
"This is a very strong signal that we are only a few days away from the end of this," said Thomas Blakeslee of Pegasus Econometric Group, a consulting firm in Hoboken, N.J.
Oil had opened lower Thursday as traders responded to an American Petroleum Institute report showing the nation's supplies of crude and gasoline were up, while the stockpile of home heating oil was not down as much as many analysts had expected over the past week.
In London, North Sea Brent Blend, a widely traded crude in Europe, settled at $16.85 per barrel Thursday, down 59 cents on the International Petroleum Exchange.