Fears ease that Venezuela's supply could be cut, but uncertainty remains in Russia and the Middle East.
By Associated Press
Published August 17, 2004
WASHINGTON - Oil prices slipped Monday after the president of Venezuela survived a recall referendum, though fears of supply interruptions in other parts of the world kept futures above $46 a barrel.
Light crude for September delivery fell 53 cents to settle at $46.05 on the New York Mercantile Exchange.
The vote in Venezuela, the world's fifth-largest oil exporter, had been one of a slew of factors driving prices higher in recent weeks, and so traders said Monday's decline could be short-lived.
The concern in Venezuela was that if the opposition had won there would have been a major overhaul of the state-run oil company, Petroleos de Venezuela S.A., and production would have suffered. But President Hugo Chavez had 58 percent of the vote after 94 percent of the votes had been counted.
"It means oil supplies are not in as much danger as people were thinking," said Agbeli Ameko, managing partner at the Denver energy research firm Enercast.com.
Elsewhere there are still signs of trouble, including unrest in Iraq and the battle by Russian oil giant Yukos, which pumps about 1.7-million barrels a day, to stave off bankruptcy. Energy markets have also been jittery amid fears of more terror attacks in Saudi Arabia - the world's No.1 producer - and simmering civil unrest in Nigeria, which is the lead producer in Africa.
These uncertainties have fueled worries that oil supplies could be cut off at a time when demand is robust. Moreover, market watchers say there's little spare output capacity in the world to make up for shortfalls.
Last week Saudi Arabia said it could put on the market an additional 1.3-million barrels per day, virtually all of the country's available production. That failed to deflate prices because experts said the comments only highlighted that the country was nearing its output limit.
Friday, Nymex crude futures closed at a record high of $46.58.
Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, said the high price of oil reflects a particular nervousness in the market about the possibility of attacks against oil infrastructure in Saudi Arabia, where industry workers were attacked by terrorists in May and June.
He said large institutional investors were helping to push prices higher by "buying futures in oil to protect against that type of event," which would likely cause stock prices to tumble.
In London, September Brent crude settled down 21 cents at $43.67 a barrel on London's International Petroleum Exchange.
The referendum in Venezuela followed a two-year drive to oust Chavez, which included a short-lived 2002 coup, a two-month strike and political riots last March that claimed a dozen lives.
Regardless of the outcome in Venezuela, traders remain wary of continuing unrest in Iraq, where journalists were ordered Monday to leave the holy city of Najaf after talks between the Iraqi interim government and forces loyal to radical Shiite cleric Muqtada al-Sadr broke down.
Two weeks of continuous fighting have put oil infrastructure at risk there. Iraq produces about 1.7-million barrels per day, or about 2 percent of the world's daily supply.
