Oil Prices Sinking Under Slack Demand and Saturated Market : Energy: The lower costs will cool inflation, but will hurt U.S. producers. Iraq may resume production under U.N. restrictions.

Oil prices slumped to new lows this week, compounding a trend that has cut $3--nearly 15%--from the price of a barrel of crude over the last three months.

The low prices will help keep inflation under control and prove a boon to some energy users. But they mean even tougher times for domestic oil producers.

In March, futures for West Texas Intermediate--the U.S. benchmark crude--were selling at about $21 a barrel. On Friday, August crude ended trading at $17.95 a barrel, down 50 cents for the day.

Fareed Mohamedi, senior economist at Washington-based Petroleum Finance Co. Ltd., attributed the slide to a sleepy gasoline market in the economically stagnant Western democracies and the prospect of increased production by Kuwait and Iraq in a world already awash in oil.

Iraq--apparently in dire need of cash--finally has seemed willing in recent days to sell its oil under tight United Nations rules set at the end of the Persian Gulf war. The U.S. government has also said it would not oppose Iraqi oil sales under strict U.N. requirements. Under the U.N. plan, Iraq could ship 500,000 barrels of oil a day for six months, raising $1.6 billion, which it could use only for humanitarian needs.

U.N. Secretary General Boutros Boutros-Ghali said Thursday that the oil shipments will be at the top of the agenda at a meeting with Iraq scheduled for Wednesday.

“For the first time in a while, the market seems to take the talks between the U.N. and Iraq seriously,” Mohamedi said. “People seem to feel that Iraq is working extra hard to meet the U.N. conditions.”

Meanwhile, Kuwait refused at the most recent meeting of the Organization of Petroleum Exporting Countries to limit itself to production of 1.8 million barrels a day, insisting on the right to produce 2 million barrels or more.

Observers of the world market expect that stubbornness to push Saudi Arabia and Iran--the two biggest OPEC producers--to cut their own production in hopes of firming up crude prices.

Oil companies that are more dependent than most on earnings from oil production--such as Los Angeles-based Atlantic Richfield Co.--are hit hardest by low oil prices. But Arco is not convinced the new lows will stick.

“We foresee crude oil prices having peaks and valleys, but generally remaining in the $20-a-barrel range,” Arco spokesman Al Greenstein said Friday. “We are geared to operate in this environment, and even a lower crude oil price environment.”

Still, Arco stock closed Friday at $113.75, down $1.875 on the New York Stock Exchange.

The oil market’s recent dip is unlikely to force a drop in prices of gasoline, which have been falling lately anyway, said retail gasoline expert Trilby Lundberg.