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Last Updated:  Wednesday, 19 March, 2003, 20:49 GMT
US oil drops below $30 a barrel
Oil workers at the Maqwa Oil Field, Kuwait
War could shut down some Middle East oil production
World oil prices fell again on Wednesday, as traders gambled on a short war.

A five day slump in oil prices has knocked 21% off the price of a barrel, as the markets brace themselves for a US-led invasion of Iraq.

US crude futures for May delivery dropped 70 cents, or 2.3%, to $29.35, following Tuesday's 9% drop.

International benchmark Brent crude oil dropped by 50 cents, or 1.8%, to $26.75 a barrel in London, hitting a 3-month low.

Troops massing

Paul Horsnell, of J.P. Morgan bank, said: "Prices have behaved as they would do after a very quick war, involving no destruction of oil infrastructure and fairly immediate post-war post-war political stability both inside Iraq and elsewhere."

His comments came as US-led combat troops in the Gulf, numbering about 150,000, took up battle positions for an invasion of Iraq.

Huge convoys have moved across the Kuwaiti desert towards Iraq, ahead of President George W Bush's 0100 GMT Thursday deadline.

All international United Nations staff, including weapons inspectors, have been evacuated from Iraq.

Revised predictions

Uncertainties over an attack have lifted in recent days sending oil prices tumbling $8.

The steep decline has removed the so-called "fear factor" from the market and led many analysts to revise their predictions.

Some were predicting a surge in prices to $40 a barrel on the outbreak of hostilities.

But most analysts are now predicting modest rises of about $2.

'Looking beyond war'

Leo Drollas, of the London-based Centre for Global Energy Studies, said: "There is always nervousness when war actually begins.

"Having fallen sharply in the last few days, I think it would likely jump about $2 higher at the onset of conflict."

Han-Pin Hsi at Deutsche Bank in Hong Kong said: "The fall indicates the market is looking beyond war.

"People are not expecting Saddam to have a scorched-earth policy."

However, analysts conceded prices could easily spike back up if Iraq sets light to its own oilfields, or the conflict is drawn out.

US reserves

An invasion will almost certainly close Iraqi crude output of 2.5 million barrels per day.

Iraq's southern neighbour, Kuwait may also be forced to shut some fields near its border.

Oil giant Shell said on Wednesday it had closed an oilfield in Iran, close to the Iraqi border, because of its proximity to the potential conflict zone.

The US is ready to release oil from its strategic reserves to prevent a severe supply interruption, but only as a last resort if OPEC producers are unable to overcome the shortage.

Oil price dips as war nears
18 Mar 03 |  Business
US fuel reserves run to record low
14 Feb 03 |  Business

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