August 31, 2004

MAY AS WELL BURN IT, IT'S SO CHEAP:

Crude Oil Drops as Threats to Supply From Iraq, Russia Diminish (Bloomberg, 8/31/04)

Crude oil futures fell close to a one-month low on expectations a cease-fire in southern Iraq will reduce the sabotage of oil pipelines and supplies from Russia will increase.

Attacks on pipelines to southern Iraqi export terminals have decreased, allowing for near-normal exports of 1.75 million barrels a day today, according to two local shipping agents. Russia, which alternates with Saudi Arabia as the world's top oil producer, will boost output 6.9 percent this year to 450 million tons, President Vladimir Putin said.

"Iraq's sustained exports and Putin's positive declarations are calming the market,'' said Renzo Mejia, a broker at Sucden (U.K.) Ltd. in London. "The market is looking for any security improvements to lower the risk premium'' in prices, which had exceeded $10 a barrel, he said.

Crude oil for October delivery tumbled as much as 56 cents, or 1.3 percent, to $41.72 a barrel on the New York Mercantile Exchange and was trading at $41.90 at 1:44 p.m. London time. It has dropped 16 percent from its Aug. 20 intraday record of $49.40. In London, October Brent crude fell as much as 3.1 percent to a one-month low of $39.40.


Posted by Orrin Judd at August 31, 2004 10:59 AM
Comments

Mexico has just announced the discovery of oil fields that, if confirmed, would conservatively raise its proven reserves to 104 billion barrels. Iraq's proven reserves, by way of comparison, are 112 bb.

Posted by: David Cohen at August 31, 2004 11:21 AM

So the "No war for Oil" crowd will now start protesting against a US invasion of Mexico?

Posted by: AWW at August 31, 2004 12:45 PM

Four months ago, when oil topped $40, you were complaining about it being too high. Now, at $41.72 you think it is cheap. In two years you will think that $60 oil is cheap.

Posted by: Robert Duquette at August 31, 2004 12:49 PM

AWW: About 150-odd years too late, but yes, they will protest the US-Mexican War. (Gosh Darn that James Polk!)

Posted by: Mikey at August 31, 2004 1:01 PM

Robert:

Yes, it's still absurdly high. Trending back down though. And oil is cheap.

Posted by: oj at August 31, 2004 1:20 PM
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