- The Washington Times - Monday, August 14, 2006

NEW YORK (AP) — Oil prices fell as much as $1.75 a barrel yesterday as a cease-fire began in Lebanon and investors responded to news that BP expects to maintain half of its production at a large oil field in Alaska despite a pipeline leak.

Light sweet crude for September delivery fell 82 cents to settle at $73.53 a barrel in electronic trading on the New York Mercantile Exchange. September Brent at London’s ICE Futures exchange slipped further to settle at $74.30 a barrel, down $1.33.

“News of the U.N.-negotiated cease-fire in the Middle East and the announcement by BP that the western segment of the Prudhoe Bay field will resume production has buoyed the market,” said Paul J. Harris, an analyst at Bank of Ireland Global Markets in Dublin.

Prices dipped as low as $72.60 during trading before a mild turnaround.

“We got into a bit of an oversold position earlier, although it’s not much of a bounce back considering how much prices have fallen recently,” said Raymond Mazzeo, vice president at Energy Merchant LLC. “It’s still a bearish market.”

The cease-fire between Israel and Lebanon’s Hezbollah militants took effect early yesterday, ending more than a month of violence that has killed at least 900 persons, devastating much of southern Lebanon and forcing hundreds of thousands of Israelis into bomb shelters.

The market had worried that the conflict might threaten world oil supplies if it spilled into other countries in the region, particularly Iran, OPEC’s No. 2 oil producer and a backer of Hezbollah. Those fears raised crude prices to a record $78.40 a barrel on July 14, two days after the fighting started.

The other positive market development came late Friday when BP PLC announced it would keep one side of the Prudhoe Bay oil field open as it replaces corroded pipes, enabling it to funnel up to half its normal output. BP had said previously it would have to completely shut down the nation’s largest oil field after revealing a leak nearly a week ago.

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