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Oil slumps as U.S. nears Baghdad
LONDON, England (Reuters) -- World oil prices fell heavily again on Wednesday as dealers reacted to military advances in the U.S.-led war against Iraq. U.S. light crude by 1500 GMT was off $1.08 at $28.70 a barrel on top of a $1.26 fall on Tuesday for an eight percent decline in two days. London Brent lost 73 cents to $25.63 a barrel. "The sell-off evidenced in oil prices, and the coincident rallies in broad financial markets, reflect a hope that hostilities will end sooner rather than later,'' said Michael Rothman, oil analyst at Merrill Lynch. "This is very hot money in the market, and it wants to get out very quickly anytime the market changes direction,'' said David Thurtell, commodities strategist at Commonwealth Bank in Sydney, of the flow of cash from financial hedge funds. The war has closed Iraq's 1.7 million barrels daily of exports from the 77 million barrel a day world market. Worries about a prolonged conflict sent prices sharply higher last week. U.S. forces accelerated their advance on Baghdad on Wednesday, launching coordinated attacks on two fronts against Republican Guard units defending the approaches to the Iraqi capital. U.S. Marines said they seized a bridge over the Tigris river in central Iraq and further west the 3rd Infantry swept past the Shi'ite Muslim holy city of Kerbala and headed for the Euphrates river just 80 km (50 miles) from Baghdad. "Today's action is a major move,'' a senior Marine officer told Reuters. The concerted moves followed a pause of several days in the U.S.-led advance across southern Iraq to shore up vulnerable supply lines and bring up munitions. Extra OPEC oilOil dealers said expectations of a continued recovery in U.S. crude inventories in a weekly report out later on Wednesday also were depressing prices. Analysts polled by Reuters forecast U.S. government data will show a rise of 2.75 million barrels to 276.7 million barrels after a week of heavy imports. OPEC raised production sharply ahead of the war to prevent a price spike and the extra crude is beginning to show up at U.S. refineries. Top world exporter Saudi Arabia in March hit its highest production level for 21 years, according to a Reuters survey of cartel supplies. OPEC pumped an extra 440,000 barrels per day in March to reach 27.65 million bpd on average, the survey of industry consultants and officials showed. Excluding Iraq, where exports were cut just ahead of the war, 10 cartel members with quotas pumped an extra 1.77 million barrels a day to 26.45 million bpd. Prices are under pressure despite the continued closure in Nigeria of 800,000 barrels a day of the West African OPEC nation's normal 2.2 million barrels per day after ethnic clashes ahead of mid-April elections. Oil companies Shell and ChevronTexaco say they will not resume operations from Forcados and Escravos in the western Niger Delta region until they can be sure of their staff's safety.
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