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Oil prices down in Asia as Lebanon truce sparks hope of end to bloodshed
By Martin Abbugao
AFP
SINGAPORE
Petroleumworld.com 08 14 06
Oil prices declined in Asian hours Monday as a UN-brokered truce went into effect in Lebanon, paving the way for an Israeli withdrawal and the deployment of an international peacekeeping force, dealers said.
Some Israeli forces began withdrawing from south Lebanon Monday after the ceasefire went into effect, the army said.
Israeli warplanes disappeared from the sky over the Lebanese capital, as well as the war-battered south and east of the country, after Israel launched an 11th-hour wave of air strikes before the agreed truce took hold.
The cessation of hostilities sparked hopes of an end to the month-long bloodshed, which security analysts had feared could drag other countries in the Middle East into a wider regional conflict and disrupt oil supplies.
At 2:25 pm (0625 GMT), New York's main contract, light sweet crude for delivery in September, was at 73.64 dollars a barrel, down 71 cents from its close of 74.35 dollars in the United States on Friday.
Brent North Sea crude for September delivery was down 57 cents to 75.06.
"The announcement of the truce in Lebanon is the main story overnight," said Tony Nunan, manager for energy risk management at Mitsubishi Corp in Tokyo.
The UN Security Council over the weekend passed 1701 which called for a truce, the withdrawal of Israeli troops from southern Lebanon after an end to the fighting and the deployment of a 15,000-strong international peacekeeping force to prevent further conflict.
Both the Israeli and the Lebanese cabinet, which includes two representatives of the Shiite militia group Hezbollah, have agreed to respect the accord.
The agreement to halt fighting raised hopes of an end to the conflict which has claimed the lives of more than 1,000 Lebanese and some 150 Israelis.
While prices fell in an immediate reaction to the truce, Nunan said the market will continue to monitor how the agreement will be implemented on the ground.
"I think people will still want to wait and see how the truce goes. Implementing the truce is quite problematic... it's going to be quite difficult," Nunan said.
Underscoring the difficulties, Israel urged the world to apply the UN resolution firmly, warning that Hezbollah must be dismantled and the Lebanese army quickly deployed in the militia's stronghold in the south.
Prices are expected to find support at between 70-72 dollars a barrel, and 80-dollar oil is off "for the time being," Nunan added.
He said the next issue for the market is whether Iran will comply with a UN Security Council resolution to halt its uranium enrichment and other sensitive nuclear fuel work by August 31 or face the prospect of sanctions.
Iran, OPEC's second largest oil exporter, insists it wants to enrich uranium only to make reactor fuel for power stations but the West suspect Tehran wants the capacity to make weapons-grade uranium.
Other factors that helped drive prices lower is the foiling last week of an alleged terror plot to blow up passenger planes flying from Britain to the United States and UK energy giant BP's announcement it will not completely shut down a major oilfield in Alaska.
BP said late Friday it would continue to pump oil from part of the giant Prudhoe Bay field while it carries out repair for a corroded pipeline.
Prices had shot up last week after BP said it may have to completely shut down operations, affecting 400,000 barrels of oil per day, or 8.0 percent of total daily US output.
But BP officials now say the shutdown will be partial and the field can continue to produce up to 200,000 barrels of oil a day.
AFP 14 0646 GMT 08 06
Copyright ©2006 AFP. All Rights Reserved.
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