Crude oil fell as much as 10 percent, its biggest one-day drop since September 2001, on speculation a war in Iraq will end quickly and with limited disruption to Middle East oil supplies.
US President George W. Bush yesterday gave Saddam Hussein 48 hours to go into exile or face attack. All UN arms inspectors in Iraq left today, UN spokesman Mark Gwozdecky said.
"The market consensus is for a short, straightforward war," said Steve Turner, an analyst at Commerzbank Securities in London. "The market is anticipating an improvement in supply, be it from the Saudis or from the release of strategic stockpiles."
Brent crude oil for May settlement fell as much as US$3.08 to a three-month low of US$26.40 a barrel on London's International Petroleum Exchange, the largest drop since a 13 percent slide on Sept. 24, 2001. Prices were down US$1.90 at US$27.58 at 11:43am.
Selling accelerated as prices fell past levels monitored by traders who base their decisions on price charts.
"It's been a domino effect," said Rob Laughlin, a director of energy broker GNI Ltd in London. "We saw funds go through big sell stops and heavy technical selling."
Saudi Arabia's state oil company booked at least eight 2 million-barrel tankers to haul more than 2.2 million tons of crude oil to the US, arriving from May onward, shipbrokers reported last week, a sign that the country is fulfilling its promise to make up for any shortfall from an Iraq conflict.
Saudi Arabia is expected to boost crude oil production to 9.4 million barrels a day by the end of March, up 200,000 barrels a day from February's average, according to the Middle East Economic Survey. Exports from Iraq through a UN-controlled program averaged 1.4 million barrels a day in the week ended March 7, the UN said. US Energy Secretary Spencer Abraham has pledged to tap the nation's Strategic Petroleum Reserve to cover supply disruptions.
The reserve stands at 600 million barrels, equal to about 272 days of US imports from the Persian Gulf, based on the average during the past year.
New York oil prices peaked at US$41.15 a barrel in October 1990 after Iraq invaded Kuwait.
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