Saturday, March 15, 2003

If war ends quickly, oil price may drop, stabilize

By Bruce Stanley
The Associated Press

LONDON - If U.S.-led forces invade Iraq, world oil prices will probably plunge from current levels and stay there - provided the conflict ends quickly and causes little damage to production capacity in the Persian Gulf, several energy analysts said Friday.

However, a war that spills into neighboring countries or one in which Saddam Hussein sabotages his own oil fields could panic markets and trigger a spike in prices to $50 or even $60 a barrel, some said. U.S. crude prices ended trading Friday at just over $35 a barrel.

The wide range of forecasts is a sign of the difficulty analysts face in trying to envision how markets will react to a war of unpredictable severity. Fighting might be over in a few days, or it might erupt into a regional conflagration that affects crude exports from Kuwait and even Saudi Arabia. How OPEC and oil-importing countries respond to a war will also have a great influence on prices.

Perhaps the only certainty is that markets will welcome any move that keeps supplies flowing.

Crude prices fell Friday on reports that Saudi Arabia's state-run oil company Saudi Aramco had chartered supertankers to carry an exceptionally large shipment of crude - 28 million barrels - to the United States for delivery in May. April contracts of U.S. light, sweet crude tumbled by more than $2 a barrel Friday in New York before rebounding somewhat to close at $35.38, down 63 cents from Thursday's close. In London, North Sea Brent crude futures settled down $1.05 at $31.38.

Analysts say that fears of a wartime disruption in supply have swollen crude prices by at least $5 a barrel. Markets worry that hostilities with Iraq will paralyze that country's 2 million barrels in daily oil shipments.

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If war ends quickly, oil price may drop, stabilize
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