Oil Prices Decline 4% on Comments From Iraq

Oil prices fell Tuesday after Iraqi Deputy Prime Minister Tariq Aziz said his country was prepared to allow United Nations weapons inspections, a development seen as reducing the threat of a U.S. attack on the Middle East’s fourth-biggest producer.

Aziz told U.N. Secretary-General Kofi Annan that Iraq would allow access to arms sites to answer charges that it is producing weapons of mass destruction.

Prices of crude oil rose last week after Vice President Dick Cheney said action against Iraqi President Saddam Hussein was inevitable.

“Tariq Aziz is sounding conciliatory, which makes it more difficult for the Bush administration to rally support for an attack,” said Michael Fitzpatrick, a futures broker at Fimat USA Inc. in New York. “We’ll have to wait for the administration’s response, but in the meantime, it tones things down.”

Crude oil for October delivery fell $1.19, or 4.1%, to $27.79 a barrel on the New York Mercantile Exchange. It was the biggest one-day decline since July 22.

Prices through Friday had climbed 20% since mid-June on speculation that military action threatened by President Bush against Hussein would disrupt shipments from a region that pumps a third of the world’s oil.

“The speculators are piling out,” said Ed Silliere, vice president of risk management at Energy Merchant in New York, which markets wholesale gasoline and heating oil. “The concern is that there will be a major delay in any military action because of the Iraqi moves.”

Oil company shares also fell on a day when stock markets tumbled. Exxon Mobil Corp. dropped $1.83 to $33.62 in New York Stock Exchange trading. ChevronTexaco Corp. fell $4.23 to $72.40.

The oil price decline accelerated after a report showed that members of the Organization of the Petroleum Exporting Countries boosted production last month and had their weakest compliance with quotas since 1998, analysts said.

Iraqi minister Aziz said the return of inspectors was conditional on the lifting of economic sanctions imposed after the Persian Gulf War ended in 1991, the restoration of Iraqi sovereignty in the north and south of the country and an end to U.S. threats, the Associated Press reported.

The White House said Tuesday that it favored the return of inspectors as a “first step.”