- The Washington Times - Thursday, March 20, 2003

LOS ANGELES, March 20 (UPI) — Crude prices continued their downward march Thursday after a brief rally inspired by ominous reports of burning Iraqi oil wells that turned out to be something of a false alarm.

Media descriptions of wells burning in the south of Iraq as the United States and Britain pushed across the frontier were later clarified and revealed that only a handful of wells were actually ablaze, renewing hopes that Iraq's oilfields could be captured intact.

May crude prices briefly topped $30 per barrel on the New York Mercantile Exchange and then reversed course when the picture from the area around Basra became clearer and settled at $28.12 per barrel, down $1.24 on the day.

April heating oil fell 1.17 cents to 82.44 per gallon while April gasoline dropped 3.29 cents to 90.96 cents per gallon.

The bearish market came as traders continued betting on a quick win by the U.S.-led armies, and hard further reassurances from government and industry that the war had not disrupted the flow of crude out of the Persian Gulf.

"Consumers can be confident in the continuing reliability of fuel supplies," said a statement issued by the American Petroleum Institute and a group of other industry associations. "Gasoline and diesel fuel (heating oil) inventories are adequate to meet normal demand and refinery production remains strong."

Energy Secretary Spencer Abraham said earlier in the day that the United States had a crude stockpile of nearly 600 million barrels on hand while the industrialized member nations of the International Energy Agency had a total of 1.2 billion barrels in reserve.

"I am confident increased supplies already on the water, the response by OPEC and major producers like Saudi Arabia, and — if needed — our large strategic stockpiles will ensure that our economy will have the ample supply of energy it needs," Abraham said in a statement.

Defense Secretary Donald Rumsfeld issued a warning to Iraq Thursday that they should refrain from trying to destroy its oil infrastructure in the same way the Iraqis set fire to some 700 wells while retreating from Kuwait during the first Gulf War.

Capturing the oil fields intact would allow a faster return for Iraq to the world market after having their output strictly limited for a decade under the United Nations' oil-for-food program.

One of the key prizes would be the capture of the southern tanker ports of Basra and Umm Qasr. Media reports Thursday that British troops had already taken Umm Qasr were later denied.

The U.S. Energy Information Administration said Thursday that Iraqi exports from Turkey had been effectively shut down by the evacuation of the United Nations personnel who administer the oil-for-food program inside Iraq.

The EIA also reported that Shell had halted production in the 60,000 barrel-per-day Soroosh field off the coast of Iran due to safety concerns. Kuwait also shut down some of its operations in the northern Abdali and Ratqa fields, but they increased output from other areas to compensate.

The combined loss of production in Iraq, Kuwait and off Iran totaled 1.8 million barrels per day, the EIA said, adding that the calculation did not take into account recent production increases from other nations.


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