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Oil prices dive on plane bomb plot
AFP
NEW YORK
Petroleumworld.com 08 11 06
Crude prices slumped Thursday on predictions that air traffic could suffer after British authorities said they had foiled a major bomb plot targeting US-bound passenger planes.
A statement from the Organization of the Petroleum Exporting Countries meanwhile that global crude supplies were adequate also soothed the market.
And efforts by British energy giant BP to avoid a complete shutdown of the Prudhoe Bay oilfield, America's largest, also lent prices some relief, traders said.
New York's main contract, light sweet crude for delivery in September, closed down 2.25 dollars at 74.00 dollars a barrel.
In London, Brent North Sea crude for September delivery settled down 2.00 dollars at 75.28 dollars per barrel.
News of the apparent foiled plot to destroy passenger jets flying to the United States from Britain drove down prices on expectations that demand for jet fuel would weaken.
"This has renewed fears, similar to those after 9/11, of seriously curtailed travel and tourism because lower consumer confidence would cut air travel and undermine oil demand," Fimat analyst Mike Fitzpatrick said.
"After 9/11 prices initially rose because supply stability was the focus. Later on, oil fell because consumer confidence was expected to fall, stalling global growth," he said, referring to the September 11, 2001 attacks.
British police said 21 people had been arrested, mostly in London and the surrounding area, in connection with the alleged plot in which terrorists would smuggle explosives aboard aircraft in hand baggage and detonate them.
Oppenheimer analyst Fadel Gheit said that several factors had driven down prices along with the transatlantic terror alert.
"BP's production should be shut down only by 20 percent to 30 percent, so it's not likely to be as bad as feared," he said.
"A very sharp drop in temperatures in the US seems to show that demand is going to fall as well," Gheit said, adding there was market relief over the lack of US hurricanes so far this summer.
Prices shot up earlier this week, with Brent striking a record high of 78.64 dollars, after BP said was shutting down its vast oil field in Prudhoe Bay to repair a pipeline leak caused by corrosion.
A complete shutdown would halt production totalling 400,000 barrels of oil per day, or 8.0 percent of daily US output.
But in an update Thursday, BP said it was still producing 120,000 barrels of oil a day from Prudhoe Bay and hoped to keep some output operational.
"The company is advancing its parallel plans of shutting in production and considering viable options where BP could safely continue to operate some production," it said.
BP said it was consulting with the US Department of Transportation and Alaska's environment department to see if it could safely continue some output, rather than shutting down the whole field, while it upgrades its pipelines.
The field's eastern operating area has already been closed. A decision on whether to shut in the western area "is expected by the beginning of next week", it said.
Traders were reassured meanwhile after OPEC said in a statement that it "remains confident that the world is still adequately supplied with oil and that no shortage will occur".
"The fact is that some of OPEC's producers can bring additional supplies to the market very quickly, if such action is deemed necessary, subject of course to adequacy of refining capacity," the Vienna-based cartel said.
The 11-nation group reiterated that it was "ready to do all in its power to correct any imbalance in the market."
AFP 10 2009 GMT 08 06
Copyright ©2006 AFP. All Rights Reserved.
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