Oil Prices Fall to $45 as Iraq Oil Flows
NEW YORK (Reuters) - Oil prices fell nearly a dollar to end just above $45 on Tuesday, in a third day of losses as a more optimistic Iraq export picture helped unwind some of the supply worries that have lifted the market to historic levels.
U.S. light crude at one point shed $1.30 to fetch $44.75 a barrel, before settling at $45.21, down 84 cents on the day.
Last week, the September contract had hit a $49.40 peak, which was the highest level in 21 years of New York oil futures trading. London Brent crude lost 71 cents to end at $42.32 a barrel.
The downturn followed a failure to hit the psychological $50 mark in New York, together with the resumption of full tilt Iraqi exports from the south and restored flows in the north.
Some analysts were starting to wonder whether prices have peaked, after this year's near 40 percent gains.
"Unless the market's worst fears of a physical supply disruption are realized, crude prices may finally be close to a turning point," wrote independent oil analyst Geoff Pyne.
Citing a more stable outlook for Venezuela, optimism for YUKOS oil exports and more predictable Iraqi flows, he added: "With this background there are few excuses for maintaining the recent risk premium, which we estimate at upwards of $10 per barrel."
Iraq resumed pumping crude oil along its northern Kirkuk pipeline to the Turkish Mediterranean port of Ceyhan late on Friday, at around 450,000 barrels per day (bpd) -- just more than half normal capacity. Iraq last sold oil pumped through from Kirkuk in late May.
Authorities have also restored full exports from the south, which continued on Tuesday despite renewed clashes in Basra city.
Reduced flows from Iraq and concern that the financial turmoil at Russia's top producer YUKOS could ultimately disrupt supplies have helped drive oil prices up $10 since the end of June. Rapid demand growth has left world oil supplies with little leeway to make up for disruption.
The Organization of the Petroleum Exporting Countries (OPEC) is pumping about 30 million bpd, with only Saudi Arabia, the world's biggest exporter, holding any significant spare capacity.
Nigeria's top oil official said on Tuesday that more production from the OPEC cartel would not lower oil prices and that crude would stay above the group's $22-28 a barrel target range. The group meets on September 15.
"We still maintain the position that the market is well-supplied. Hedge funds are the main problem. Lifting quotas will not solve the problem," Nigeria's Presidential Adviser on Petroleum Edmund Daukoru told Reuters.
U.S. Energy Secretary Spencer Abraham and International Energy Agency chief Claude Mandil agreed during a meeting on Tuesday that prices have surged higher than supply and demand fundamentals merit.
"Prices are very unfortunate and not justified," IEA Executive Director Mandil told Reuters in an interview. "We think market fundamentals today are not compatible with those levels of prices because there is more supply than demand."
Fuel demand has been growing at the fastest rate in 24 years despite the price surge, but worries linger that world economic growth could suffer.
Japanese Finance Minister Sadakazu Tanigaki warned on Tuesday that it was becoming increasingly important to watch the effect of high oil prices on the world's second-biggest economy.
© Reuters 2004. All Rights Reserved.
What do you think? Leave a comment below.
Sign up for regular Resilience bulletins direct to your email.