Crude oil fell as progress made by US-led forces in Iraq and the resumption of production in Nigeria signaled world supplies may soon rise.
US armored columns gathered on the outskirts of Baghdad in the war to topple the regime of Iraqi President Saddam Hussein. In Nigeria, ChevronTexaco Corp and Royal Dutch/Shell Group said their oil production is resuming after a 12-day shutdown caused by violence in the Niger River delta. Iraq and Nigeria pumped about 6 percent of the world's oil in February.
"We're going to be getting more oil," said Aaron Kildow, an energy broker at Prudential Securities Inc. in New York. "Nigerian production is returning to normal and the progress of allied troops to Baghdad makes the resumption of Iraqi exports likely."
Crude oil for May delivery was down US$0.86, or 3 percent, at US$28.11 a barrel as of 12:14pm on the New York Mercantile Exchange. Oil was down 6.7 percent this week. Prices fell to US$27.82 a barrel in electronic trading, the lowest since March 25.
Low inventories will keep prices from falling much further this quarter, Jay Saunders, an analyst at Deutsche Bank Securities in New York, said in a report today. Saunders reiterated that he expects oil to average US$28 a barrel during the three-month period.
"There is plenty of reason for the oil to stay at this level," Saunders said. "We'll probably see lower imports in the next couple of weeks because of the Nigeria disruption. Also, the quick resumption of Iraqi exports isn't a done deal."
US crude-oil inventories of 280.7 million barrels are down 14 percent from a year ago, according to the Energy Department.
In London, the May Brent crude-oil futures contract was down US$0.92, or 3.6 percent, at US$24.58 a barrel on the International Petroleum Exchange. Prices earlier fell to US$24.30, the lowest since March 21.
Prices rebounded from the day's low after Iraq's information minister, Mohammed Al-Sahaf, said his country will take "non-conventional action" tonight against allied forces, according to an English translation of televised remarks made in Arabic.
Iraq produced an average 2.48 million barrels of oil a day in February and 1.4 million last month, most before the war.
Allied forces have secured Saddam Hussein International Airport and renamed it Baghdad International, US Brigadier General Vincent Brooks said in a televised briefing from US Central Command in Doha, Qatar.