Fear of longer Iraq war, unrest in Nigeria bumps crude prices
Tuesday, March 25, 2003
LONDON -- Crude prices surged Monday on market fears that the war in Iraq might take longer than some had anticipated and because of a disruption of supplies from Nigeria.
Stiffening resistance to the U.S.-led invasion of Iraq has undercut hopes for a brief war and an early rehabilitation of that country's oil industry. Iraq pumped 2.5 million barrels a day before fighting began and typically exported about four-fifths of that amount.
May contracts of North Sea Brent, Europe's benchmark crude, jumped $1.85 a barrel to $26.20 in late trading in London. Contracts of U.S. light, sweet crude for May delivery were trading $1.84 higher at $28.75 a barrel in New York.
Fighting around burning oil wells in southern Iraq's Rumeila oil field has driven out civilian oil-fire specialists working to quell the blazes, a top firefighter said. U.S.-led forces had previously thought the field's facilities were secure.
Kuwaiti firefighters claimed credit for putting out the first fire at a booby-trapped Iraqi well Monday. Kuwait's senior firefighter, Aisa Bouyabes, said he believes his team and others can douse the six remaining fires in Iraq's Rumeila South oil field within two weeks.
Coalition forces have made a priority of securing Iraqi oil installations to prevent their possible sabotage by Iraqis.
Confusion persisted over the extent of any Iraqi plans to damage or destroy their southern oil facilities. British military sources said last week that almost all Iraqi oil facilities had been mined or booby-trapped, indicating that Saddam Hussein was prepared to blow up his entire economy.
Iraq's newspaper Al-Thawrah said on its Web site Sunday that this was a lie. "What is burning in that area is no more than artificial trenches filled with oil to be used as obvious methods of defense," the paper said.
Iraqis have sometimes ignited oil in trenches to create thick smoke to confuse their attackers. Iraq has 1,685 producing wells.
Rob Laughlin, managing director of London brokerage GNI Man Financial, blamed fears of an "elongating" war for causing much of the market's jitters.
"I think a lot of people thought everything could end by Sunday," added Orrin Middleton, an analyst at Barclays Capital in London. "As it was, they were overoptimistic. They came in Monday and began covering their open positions."
Another cause for concern was social unrest in Nigeria that has forced oil companies there to suspend at least 40 percent of the country's production.
Shell Development Petroleum Co, a unit of Royal Dutch/Shell in Nigeria, has shut down 370,000 barrels a day in crude output after evacuating facilities in the oil-rich Niger River delta, company spokeswoman Kate Hill said Monday. ChevronTexaco on Sunday evacuated staff and shut practically all of its installations in the area, suspending production of 440,000 barrels a day.
The Niger delta has suffered civil unrest between rival ethnic Ijaw and Itsekiri communities in the run-up to parliamentary and presidential elections in April. Nigeria, which normally pumps about 2 million barrels a day, has now lost more than 800,000 barrels in daily production due to weeks of fighting.
"People have one eye focused on Nigeria to see what happens," Middleton said.
Nigeria normally accounts for seven percent of U.S. crude imports.