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DJ OIL FUTURES: Nymex Oil Ends Under $65 As Iran Fears Ease
(Comtex Business Via Thomson Dialog NewsEdge)NEW YORK, Feb 02, 2006 (Dow Jones Commodities News via Comtex) --By Masood Farivar
OF DOW JONES NEWSWIRES
Crude oil futures plunged nearly $2 and slid below the psychologically important $65 a barrel level Thursday as fears of a possible disruption in Iranian oil supplies eased.
Crude for March delivery on the New York Mercantile Exchange hit an intraday low of $64.40 a barrel before closing at $64.70, down $1.86. In the last three sessions, the contract has given up nearly half of the gains it posted last month.
Petroleum products fell just as hard, with gasoline leading the way amid weakness in the cash market. Gasoline for March delivery was 6.28 cents lower at $1.6660 a gallon. Heating oil for March delivery was 5.32 cents lower at $1.7708 a gallon.
The losses came as the International Atomic Energy Agency board broke for the day without reaching consensus on referring Iran to the U.N. Security Council. IAEA officials said they would urge the U.N. body not to take any action against Iran until March.
U.S. officials made similar conciliatory statements that appeared to underscore a desire to seek a diplomatic solution with Iran over its nuclear program. U.S. ambassador to the IAEA Greg Schulte said the U.S. isn't immediately seeking sanctions or other punitive measures against Iran.
In his statement to the IAEA board, Schulte said reporting the Iran issue to the Security Council would increase the diplomatic tools available to the international community and wasn't aimed at sanctions against Iran.
The comments along with postponement of action against Iran until March raised hopes for a diplomatic way out of the crisis, said Fadel Gheit, an energy analyst at brokerage Oppenheimer & Co. in New York.
"The Russians and the Chinese are mediating, trying to find a face saving way for (Iranian President Mahmoud) Ahmadinejad to declare victory at home," he said.
Russia has proposed that Iran carry out sensitive uranium enrichment work inside Russia, which an Iranian diplomat said on Wednesday Tehran was seriously considering. This would alleviate western concerns that Iran was seeking to develop nuclear weapons.
Iran's chief nuclear negotiator told the head of the IAEA his country would severely curtail the agency's inspections of Tehran's atomic program and resume uranium enrichment if referred to the Security Council.
Gheit said that about $5 to $10 of the price of oil reflects market concerns about the Iran crisis and that prices will likely head back toward $60 if a diplomatic solution appears likely.
Edward Meir, an analyst at brokerage Man Financial, said the three-session drop in oil prices represents a reassertion of bearish fundamentals. Oil inventories have swelled to well above their historic average, beginning to put downward pressure on prices.
"The fundamental picture is imposing itself on the market," Meir said. "It's looking very bearish."
Moreover, he added, a recent spike in open interest, or the number of outstanding contracts, left the market vulnerable to long liquidation.
- By Masood Farivar; Dow Jones Newswires; 201 938 2094; masood.farivar@dowjones.com
(END) Dow Jones Newswires
02-02-06 1516ET
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