Analysis: Small Earthquake in the Oil Market

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Analysis: Small Earthquake in the Oil Market United Press International

December 01, 2000

WASHINGTON, Dec 1 (UPI) -- Political analysts scurried excitedly Friday, waiting for sharp movement in the oil or securities markets after Iraq cut off oil deliveries, demanding that buyers should pay a 50 cents premium per barrel on top of the UN oil-for-food exchange program.

The market, people with actual money at stake, yawned.

The January contract for benchmark light crude on the New York Mercantile Exchange had fallen 80 cents Thursday, to $33.70 per barrel. At 11.13 Friday, the contract was trading at $33.63, down an additional 7 cents.

Saddam Hussein talked, but the markets didn't bother to listen.

Iraq's oil exports total 2.3 million barrels per day, about 5 percent of world consumption. If production were halted for a prolonged period, either Saudi capacity or the strategic Petroleum Reserve could be called upon to fill the gap.

The latest (Nov. 29) weekly report by the American Petroleum Institute showed crude and distillate inventories up sharply, with the deficit in crude stocks down to 8 million barrels compared with 30 million only a month ago.

Iraq needs the money and a prolonged cutoff in supplies would be unlikely. Even if such a cutoff took place, inventories are more solid than they were a month ago, and there are alternative sources of both short-term and long-term supply.

Absent another invasion of Kuwait (a much more important oil producer), the market refuses to panic at Saddam's eccentric machinations.

http://denver.petroleumplace.com/egatecom/scream/2000/12/01/up/0000-0787-us-iraq-oil-analysis.html

-- Martin Thompson (mthom1927@aol.com), December 02, 2000


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