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Reuters: Oil tumbles as tensions unwind

Crude prices drop nearly $3, extending declines after Iran released British sailors last week.

April 9 2007

NEW YORK (Reuters) — Oil prices tumbled about 4 percent Monday as last week’s selloff that followed Iran’s release of 15 British sailors accelerated.

Light, sweet crude for May delivery sank $2.69 to $61.59 a barrel on the New York Mercantile Exchange.
 
The two-week detention of the British sailors had driven U.S. crude back briefly above $68 a barrel, the highest price since September.

And Iraq’s big oil contracts go to …

But last Thursday’s release of the British sailors and marines eased fears of growing tensions between the West and Iran, the world’s No. 4 oil producer, sending prices lower.

Selling then accelerated Monday after a long holiday weekend.

However, concerns about Iran’s uranium enrichment program and the war in Iraq helped keep a floor under prices, which despite the recent slide remain well above the 2007 low of $49.90 a barrel hit in January.

“‘Iranium’ remains a hot issue and, as importantly, the lack of an Iraqi solution will continue to haunt the Middle East for months to come,” said Olivier Jakob, from oil industry consultancy Petromatrix.

Uranium enrichment

Iran President Mahmoud Ahmedinejad announced on Monday his country has begun the first stage of what it calls “industrial scale” uranium enrichment, which the West fears could be used to make nuclear weapons.

Tehran has rejected United Nations demands to halt enrichment, instead pressing ahead with a nuclear program it calls peaceful.

Solid demand and limited supply have limited the fall in oil prices from six-month highs reached during Iran’s detention of the British military personnel.

“There are fears of a tight U.S. gasoline market over the summer,” said Christopher Bellew, senior vice president at Bache Commodities.

U.S. gasoline stocks fell 5 million barrels in the week to March 30, when analysts had expected a drop of just 300,000 barrels. U.S. gasoline demand usually peaks over the summer.

Members of the Organization of the Petroleum Exporting Countries (OPEC) insist the global oil market is well supplied and high prices reflect tensions over Iran rather than any shortage.

Iran’s Oil Minister Kazem Vaziri-Hamaneh said 1.7 million barrels a day in oil supply cuts that OPEC agreed last year had balanced the market.

“After the OPEC decisions to cut, which have been fairly well implemented, we see stability in the market,” he said on the sidelines of a gas meeting in Qatar, attended by seven of OPEC 12 members.

With the exception of ConocoPhillips (up $0.54 to $68.50, Charts), stocks of most major oil companies, including BP (down $0.41 to $64.84, Charts), Chevron (down $0.16 to $75.45, Charts), Royal Dutch Shell (down $0.58 to $66.46, Charts) and Exxon Mobil (down $0.40 to $76.82, Charts), have risen since the heightened tensions with Iran started on March 23.

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