Oil prices fell 4 percent to a four-month low yesterday as fierce fighting erupted in Baghdad, raising expectations of a quick end to the war with little damage to Iraq's oil infrastructure.
On the 19th day since Washington launched its attack, the US military said it had taken control of Saddam Hussein's main presidential palace and entered a second but met resistance from the Republican Guard.
"The expectations are that if Baghdad falls, there will be no need to fight for the oilfields. The fall of Baghdad signals a peaceful handover of the rest of Iraq's oilfields," said Sydney-based oil analyst Simon Games-Thomas.
"If war carries on and on, there's a greater risk of damage to oil infrastructure."
Benchmark Brent crude oil fell US$1.07 to US$23.61 per barrel, its lowest since mid-November. US crude futures lost US$1.19 to US$27.43 a barrel.
The value of oil has slumped by 30 percent in the last month as uncertainty over the war has lifted and some of the market's worst fears of destruction have not been realized.
"In the short-term, the combination of these bearish factors supports our forecast of a low of US$20 a barrel between now and the end of the quarter," SG economist Frederic Lasserre said in a research note.
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