Oil prices tumble as Iran fears ease



By Antoine Agasse
AFP
NEW YORK
Petroleumworld.com 02 08 06

Oil prices fell sharply Tuesday as trader concerns eased about the stalemate over Iran's nuclear energy program and the market awaited US supply data.
New York's main contract, light sweet crude for delivery in March, skidded 2.02 dollars to close at 63.00 dollars per barrel.

In London, the price of Brent North Sea crude for March delivery dropped 1.77 dollars to 61.56 dollars per barrel in closing trade.

John Kilduff, analyst at Fimat USA, said some of the concerns about a standoff with Iran affecting the oil market have retreated.

"Basically, some easing of the tension vis a vis the Iran situation helped to take some of the worries out of the market in term of potential supply disruption from that country," he said.

Kilduff said the market has been driven not by supply and demand factors but by geopolitical worries in recent weeks.

"It's quite easy for the prices to fall precipitously once any of those worries lessen," he noted.

But he said traders were not ruling out a crisis over Iran.

"You still have to be quite worried about the Iran situation worsening and worsening quickly and causing prices to go back up," he said.

In the meantime, he said the market was expecting a strong report on US inventories. The US Department of Energy was set to release its weekly report Wednesday on reserves of crude oil and refined products.

Analysts' consensus forecast is for crude stocks to have risen by 800,000 barrels last week, while gasoline (petrol) reserves are predicted to have increased by 1.6 million barrels.

The market expects distillates, including heating fuel and diesel, to have dipped by 100,000 barrels.

"The market is well supplied with both crude and products," noted Victor Shum, an analyst with energy consultancy Purvin and Gertz.

"The potential supply disruption risk premium has already been built into the price and because there really is no immediate threat to supply ... Prices are correcting downwards," he added.

The United Nations nuclear watchdog, the IAEA, voted Saturday to refer Tehran to the Security Council over its nuclear programme. In retaliation, Iran resumed full-scale uranium enrichment and stopped UN spot checks of its nuclear sites.

Some dealers fear that possible UN sanctions against Iran may lead to supply disruptions from the oil-rich nation.

The Islamic republic is the second-biggest producer within the Organization of the Petroleum Exporting Countries (OPEC) and exports some 2.7 million barrels of crude per day.

Oil prices gained almost 9.0 percent in January on strong fund buying and rising geopolitical tensions, mainly in Iran and Nigeria, who together account for approximately 8.0 percent of global crude oil production.

Crude futures hit 69.20 dollars in New York on January 23 but have since declined on rising US energy inventories and milder than expected weather in the northern hemisphere winter.

They hit a historic high point of 70.85 dollars in August 2005 after Hurricane Katrina devastated energy infrastructure in the US Gulf of Mexico.

AFP 02/07/06

Copyright © 2006 AFP. All rights reserved

 

 

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