Thursday, July 03, 2025, 3:48AM | 
MENU
Advertisement

Well-oiled fears: Yesterday's respite aside, some traders worry oil could jump to $60 if issues aren't resolved soon

Well-oiled fears: Yesterday's respite aside, some traders worry oil could jump to $60 if issues aren't resolved soon

NEW YORK -- Oil prices made an about face yesterday, falling below $48 a barrel, as tensions between U.S. forces and rebel fighters in Iraq eased, raising hopes that attacks against the country's oil infrastructure would subside.

U.S. light crude for September delivery dropped 84 cents to settle at $47.86 on the New York Mercantile Exchange, retreating from Thursday's record closing price of $48.70.

Crude futures have soared more than 50 percent in the past year, although when adjusted for inflation, oil is still roughly $9 less per barrel than it was leading up to the first Gulf War.

Advertisement

With worldwide supply cushion razor thin at a time of robust demand, traders said oil markets would remain on edge for some time.

However, the prospect of an end to the 2-week-old anti-U.S. uprising in Iraq gave reason for oil markets to take a breather from a rally that has caused prices to rise by about 30 percent in the past six weeks.

"If things are not getting worse in Iraq that means they are potentially getting better," said Dan Lippe, an analyst at the Houston-based consultancy Petral Worldwide.

Militiamen loyal to rebel Shiite cleric Muqtada al-Sadr yesterday removed their weapons from the revered Imam Ali Shrine in Najaf as part of an arrangement aimed at ending their revolt.

Advertisement

Iraq's highest Shiite cleric, Grand Ayatollah Ali al-Husseini al-Sistani, agreed to take control of the shrine, which al-Sadr's forces turned into a stronghold, although an agreement on how to transfer authority has not yet been reached.

Analysts said a cease-fire would help Iraq bring oil exports, now at around 1 million barrels a day, back up to 1.7 million barrels a day -- the output level before the latest uprising in Najaf.

"If the situation is alleviated and we get a peaceful settlement, oil prices could go down $2 really quick," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "It could mean that we'll see Iraqi exports back up to where they were before this conflict in a short time."

But those efforts have been frustrated by insurgents' attacks on the Gulf state's vulnerable pipeline network.

Yesterday, after oil markets had closed, Iraqi police reported that militants loyal to al-Sadr blew up an oil pipeline near the city of Amarah. The extent of the damage was not immediately clear.

With sabotage against Iraqi oil infrastructure still a reality, analysts tempered their optimism about yesterday's cease-fire. "The Iraqi situation seems up in the air every day," said Tom Bentz, a trader at BNP Paribas Futures in New York.

Analysts also cite the fear of more terror attacks in Saudi Arabia, the world's top producer, and the battle by Russian oil giant Yukos against bankruptcy as other factors behind the price surge.

Assuming that the latest truce in Iraq sticks, Lippe said "the most significant thing that we need to deal with ... is how the Russians resolve the problem with Yukos."

The Russian government is trying to collect $3.4 billion in back taxes from Yukos -- a move that threatens to weaken the oil giant's daily productivity of 1.7 million barrels, or 2 percent of global output.

With uncertainty in Iraq and Russia lingering, some traders have started to whisper about the possibility of $60 barrel if events take a turn for the worse in either place, even as the head of OPEC made soothing-but-vague comments about expectations of "a significant outcome" from its next meeting in September.

The Organization of Petroleum Exporting Countries President Purnomo Yusgiantoro said yesterday in Jakarta: "I expect there will be a significant outcome from the meeting to overcome this big problem [of rising oil prices]."

Purnomo, who also is Indonesia's energy minister, told reporters OPEC will also meet with major non-OPEC oil producers at the meeting. He didn't elaborate.

First Published: August 21, 2004, 4:00 a.m.

RELATED
Comments Disabled For This Story
Partners
Advertisement
Minkah Fitzpatrick waves to fans as he runs on the field before a game against the Jaguars at Acrisure Stadium on the North Shore on Sunday, Oct. 29, 2023.
1
sports
Joe Starkey: Steelers clearly won the Minkah Fitzpatrick trade — but to what end?
New Pennsylvania highway welcome signs and license plates were unveiled by Gov. Josh Shapiro on Tuesday, July 9, 2024.
2
news
Here's how many new Pa. license plates have been issued so far
Pittsburgh Pirates pitcher Mitch Keller delivers during the fifth inning of a baseball game against the St. Louis Cardinals, Wednesday, July 2, 2025, in Pittsburgh.
3
sports
3 takeaways: Pirates' sweep over Cardinals highlighted by dominance on the mound
Pittsburgh Pirates pitcher Mitch Keller delivers during the first inning of a baseball game against the St. Louis Cardinals, Wednesday, July 2, 2025, in Pittsburgh.
4
sports
Instant analysis: Pirates shut out Cardinals to complete sweep without allowing a run
The U.S. Capitol building from the Washington Monument in Washington
5
business
'An explosion of need:' Pittsburgh hospitals brace for Medicaid cuts
Advertisement
LATEST business
Advertisement
TOP
Email a Story