[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated:  Friday, 14 March, 2003, 23:54 GMT
Oil prices dive on 'swift' war talk
Oil workers at a crude oil flowline in Maqwa Oil Field, Kuwait
Will supplies remain unaffected?

Oil prices have fallen from recent highs on suggestions that a US war against Iraq would be over quickly and cause very little damage to production.

US light crude oil fell 63 cents on Friday to $35.38 a barrel, making a fall of 6.5% in the past two days.

London benchmark Brent oil also fell, down $1.05 to $31.38 per barrel, after having hit an eight-week low.

Dealers said market perceptions were now shifting to the idea that a war would be swift and contained, therefore not disturb supplies from the Middle East, supplier of 40% of the world's crude oil exports.

Heading for a fall?

"Last time in the 1991 Gulf War, there was a big collapse when the shooting started and perhaps this time trader are getting in ahead of the game," said Christopher Bellew at Prudential-Bache International brokers.

Analysts said investments were also moving out of oil and make towards the stock market where a number of companies are now looking substantially undervalued.

Crude oil prices also slipped on reports that Saudi Arabia's state-run company Saudi Aramco hard chartered supertankers to carry an extra large shipment of oil to the United States in May.

Analysts said fears of a disruption to supply had exaggerated prices by as much as $5 a barrel. But they are now predicting any conflict would lead to a sharp slump in prices.

However, they also cautioned that if a war spills into neighbouring countries, the prices would soon swoop back up to levels as high as $50 or $60 a barrel.

"People are....reexamining their handicapping on what is to happen next," said Bill O'Grady at AG Edwards.

War talks

The United States is due to hold an emergency summit with Britain and Spain on Sunday in a final effort to overcome UN opposition to the conflict.

Many market watchers see the move as a last-ditched attempt for UN backing before the US proceeds with its attack.

Oil prices have until now been steadily rising on the suggestion that a conflict would lead to restricted supplies, pushing prices to levels not seen since October 1990.

But news of the Saudi shipments along with a fear that history would repeat itself are reversing that notion.

"We are adamant that oil prices will fall," said Angus McPhail, an analyst at ING Financial Markets.

US to tap oil reserves in crisis
11 Mar 03 |  Business
Opec plans for war footing
10 Mar 03 |  Business
Oil marches higher on war fears
10 Mar 03 |  Business
War-wary oil prices keep on rising
24 Feb 03 |  Business
Headaches ahead for Opec
13 Jan 03 |  Business

The BBC is not responsible for the content of external internet sites


News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific