- The Washington Times - Thursday, March 27, 2003

LOS ANGELES, March 27 (UPI) — Gloomy reports on the condition of Iraq's dilapidated oil infrastructure and the possibility the ongoing war could last for months brought the bulls back to the energy market Thursday.

May crude futures surged above $30 per barrel on the New York Mercantile Exchange after a pair of reports were released: One declared that Saddam Hussein's regime planned to fight it out inside Baghdad, and the other mentioned that getting Iraq's shopworn oil facilities back on line would be an even more daunting job than had been expected.

"It is estimated that it will cost $1 billion to get the oil infrastructure to allow the field to yield its capacity of 1.8 billion barrels a day," British Air Marshall Brian Burridge told reporters in Qatar. "We expect Iraq to be exporting oil within three months."

The prospect of the United States still at war and Iraqi oil still off the market during the summer driving season helped send May crude up a strong $1.75 to $30.37 per barrel. April gasoline rose by more than a nickel to 97.47 cents per gallon.

Tumbling futures prices last week had brought some temporary hope to motorists who have been paying top dollar for gasoline during the winter months when demand is traditionally low and refiners are busy filling their inventories with fuel for summer.

"With the high level of imports seen last week, U.S. commercial crude oil inventories increased by 3.7 million barrels," the U.S. Energy Information Administration said Thursday. "However, with crude oil refinery inputs relatively unchanged, inventories for both major petroleum products were mixed. Distillate (diesel and jet) fuel inventories increased by 2.3 million barrels, but motor gasoline inventories fell by 2.1 million barrels last week and remain below the low end of the normal range."

The chronic low inventories have kept retail gasoline prices at levels well above last year. The EIA said Thursday that the average price for a gallon of regular was $1.69, nearly 4 cents below last week but around 34 cents above last year.

Exacerbating the situation in the near term has been political upheaval in Venezuela and Nigeria, both of which are major suppliers of crude to U.S. refiners. Venezuela's production has been gradually returning to normal in recent days, however Nigerian output is now down by more than 800,000 barrels per day.

Despite repeated White House denials that the war with Iraq is about control of oil, getting the Iraqi fields back on line as soon as possible is of keen interest to the United States and Britain.

Bringing more oil on to the market would serve to both lower prices and provide revenues to pay for the rebuilding of Iraq after more than 10 years of war and economic sanctions.

"Once Saddam Hussein is gone, the U.S. will work with the Iraqi Interim Authority that will be established to tap Iraq's oil revenues, the funds Iraq is owed in the U.N.'s 'oil for food' program, and other Iraqi resources to fund their reconstruction effort," Defense Secretary Donald Rumsfeld told a House subcommittee Thursday.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide