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Full CoverageOil's 3-Day Slump Ends 2-Year Bull Run
By Richard Mably
LONDON (Reuters) - Oil prices extended a heavy losing streak on Tuesday, prompting dealers to herald the end of the two-year-old bull run that has slowed world economic growth.
London Brent blend closed a sharp $1.50 weaker at $27.84 a barrel and has fallen by $4.04 a barrel in the last three trading days.
U.S. light crude plummeted to near four-month lows, standing $1.67 lower at the close at $29.55 a barrel, a $4.27 drop since Thursday.
It fell below $30 a barrel for the first time since August 9.
Prices took steep falls in late trade after news that the United Nations (news - web sites) had presented Iraq with a compromise proposal in a bid to end a dispute over pricing that has led to a halt in Baghdad's crude oil exports.
The United Nations oil overseers were waiting for a response from Baghdad, a U.N. source said.
The source had no details of the proposal by the overseers. But Western diplomats said the proposal showed the U.N. is making a move to try and solve the issue.
As traders waited for concrete signs of a breakthrough, analysts noted that oil was finally losing steam after a sustained run.
``The great bull market is over,'' said U.S. oil analyst Bill O'Grady of A.G. Edwards.
Brent had rocketed from the pits of less than $9.55 in December 1998 to peak at $35.30 in mid-October. Brent has averaged $19.20 over the past 10 years.
Bizarrely, oil's headlong dive this week comes despite the suspension since Friday by Iraq of sales under its oil-for-food exchange with the United Nations.
``The market has become desensitized to Saddam's politicking,'' said Peter Gignoux, head of the energy desk at Schroder Salomon Smith Barney, of the Iraqi leader Saddam Hussein.
``The oil market at the best of times is a house of mirrors and this just goes to prove how quickly market psychology can turn.''
Iraq on Tuesday appeared to backtrack in its standoff with the United Nations over December oil pricing that has deprived world markets of 2.3 million barrels daily, five percent of global exports.
Hopes For Iraq Resumption
Hopes for a breakthrough came after Iraqi Oil Minister Amir Rasheed told OPEC (news - web sites) Secretary General Rilwanu Lukman that he was optimistic that the dispute could be resolved.
``Rasheed confirmed to the Secretary-General that Iraq was engaged in urgent negotiations with the U.N. with a view to resolving the issue, a resolution which Iraq hoped would be achieved in the next day or two,'' the OPEC news agency reported.
But the United Nations denied that talks had taken place.
Analysts said prices had fallen because dealers were not expecting a lengthy Iraqi outage and because high supplies from other OPEC nations were rebuilding lean inventories that normally are drawn down at this time of year.
In addition the United States has said it could release more strategic reserves after October's sale and the world's biggest producer Saudi Arabia had promised to fill any gap left by an Iraqi outage.
``The truth is that Saddam has done OPEC a great favor,'' said U.S. consultant Philip Verleger. ``Today, his oil isn't needed.''
Market Copes Without Saddam
Meanwhile, speculators anticipating an Iraqi stoppage had decided to get out of the market.
Signs were too that Iraq might be prepared to compromise on a separate issue, its insistence that customers pay a 50-cent surcharge.
Aside from the pricing dispute, Baghdad has said that it would boycott companies and countries which sold its oil to nations that it regarded as hostile.
It did not name hostile countries, but the remarks by an Iraqi official were interpreted primarily to mean the United States.
-- Anonymous, December 06, 2000