Oil prices sink on profit-taking

AFP
NEW YORK
Petroleumworld.com 02 28 06

World oil prices plunged Monday on profit-taking after having spiked above 62 dollars at the end of last week on simmering supply concerns.

Dealers said the oil market was setting aside international political tensions following data last week that showed an increase in energy stockpiles in the United States.

New York's main contract, light sweet crude for delivery in April, sank 1.91 dollars to close at 61.00 dollars a barrel. The contract had gained over 2.00 dollars on Friday to finish at 63.25 dollars a barrel.

In London, the price of Brent North Sea crude for April delivery plummeted 1.61 dollars to end at 60.99 dollars a barrel.

"Word of progress in the Iran-Russian talks and the fact that the Saudis eliminated some terrorists are sending prices lower," Alaron Trading analyst Phil Flynn said.

Oil prices had spiked last week after an attempt to blow up the world's largest oil-processing plant in Saudi Arabia, blamed on the Al-Qaeda terror network.

The attack on the Abqaiq processing plant in the oil-rich Eastern Province was foiled by security forces on Friday when they killed the would-be suicide-bomber drivers of two trucks laden with explosives.

On Monday, Saudi security forces killed five suspected Al-Qaeda militants who were hiding in a Riyadh house with a cache of explosives and who were linked to the planned attack at Abqaiq.

The kingdom, which sits on a quarter of global oil reserves, currently pumps around 9.5 million barrels of oil per day and has an output capacity of 11 million bpd.

Analysts also fear that tensions over Iran's nuclear plans could lead to disruptions of oil supplies. Iran exports 2.6 million bpd and is the second-biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.

Iran and Russia were to resume 11th-hour talks in Moscow on Tuesday to try to resolve worldwide angst over the Islamic republic's nuclear programme, feared by the United States to be a covert grab for an atomic bomb.

Fimat analyst Mike Fitzpatrick said there was a "degree of quiescence for now" on the oil markets.

But he added: "The geopolitical support will remain a fixture."

Traders were also tracking events in Nigeria, Africa's biggest producer of crude, where militants are threatening fresh attacks against foreign oil companies.

Currently, "geopolitical factors are getting swept under the rug" because of the strong US inventory buildup, said Tony Nunan, an energy manager with trading house Mitsubishi Corp. in Tokyo.

"People are focusing on the immediate concerns and there is no shortage of oil right now. There may be a shortage soon but not right now," he said.

The Department of Energy said Thursday that US crude oil reserves rose by 1.1 million barrels to 326.7 million in the week to February 17, bigger than the 700,000-barrel increase expected by analysts.

Crude stocks in the United States, the world's biggest consumer of energy, are some 10 percent higher than at the same stage last year.

AFP 02 27 06

Copyright © 2006 AFP. All rights reserved

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