Crude oil fell as much as 1.7 percent to its lowest level in more than a week after Israel ordered its armed forces to withdraw from two West Bank cities, reducing concern that Middle East oil supplies may be disrupted.
Israeli troops began withdrawing from Qalqilya and Tulkarm yesterday, Cable News Network reported. Crude oil jumped more than a fifth last month because fighting between Israel and the Palestinians raised the prospect supplies may be reduced from the region, which produces about one-third of the world's oil.
"The pullout has really calmed the market down," said David Thurtell, commodity strategist with Commonwealth Bank of Australia in Sydney. "In the last two or three weeks Israel has added a few bucks to the price."
Crude oil for May delivery fell as much as US$0.46 to US$26.08 a barrel in electronic trading on the New York Mercantile Exchange. It recently traded at US$26.21. In floor trading yesterday, the contract gained 1.3 percent after Iraqi President Saddam Hussein ordered a 30-day halt in the nation's oil sales to protest Israel's occupation of Palestinian territory. Israel's occupation had prompted Iran last week to call on Middle East countries to halt oil supplies to Israel's supporters in a bid to force Western countries to pressure Israel into withdrawing from Palestinian cities.
Libya said it would support a halt in oil exports to countries that back Israel.
Israel's withdrawal from the West Bank cities, announced yesterday by Defense Minister Binyamin Ben-Eliezer, came less than six hours after US President George W. Bush repeated his demand for a pullout.
"It's a start," Bush's spokesman, Ari Fleischer, told reporters after Israel announced the limited withdrawal. "As the president said last Thursday, all parties in the Middle East have responsibilities, and the president expects all parties to step up to them." Israeli troops occupied most Palestinian towns in the West Bank in a military offensive that began March 29, after a Palestinian suicide bomber killed 27 people during a Passover dinner at an Israeli hotel.
"Things are calming down over there and the spike in prices is short-lived," said Peter Best, head of regional energy research at Credit Suisse First Boston in Hong Kong. "Beyond that, demand has not really picked up in Asia, which is one of the major swing areas in terms of demand."
As Japan, the biggest economy in Asia, is mired in its 17th month of recession, demand for oil has shrunk.
Oil consumption in Asia will probably rise 2.5 percent this year, compared with a 1 percent contraction in 2001, Best estimated. Still, this year's demand is below the average growth of 4 percent a year in the past six years.
In 2000, Asia consumed 20.7 million barrels of oil a day, or 28 percent of global demand, according to BP Plc.
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