NEW YORK (AP) – Crude futures prices settled slightly higher Monday on the New York Mercantile Exchange, sending the clear message that even Saddam Hussein’s capture couldn’t quell its determinationto move higher.
Ahead of the day’s trade, market participants roundly predicted crude prices would fall at least in initial reaction to news that he was in custody.
Instead, crude futures reached positive territory shortly after trade opened, defying some shallow declines at the open and a loss of more than $1 per barrel in overnight trading.
“Your price being at $32 to $33 a barrel really had nothing much to do with a war premium,” said Jan Stuart, a New York analyst for Fimat USA Inc., an energy products broker-dealer.
Many analysts had expected the market to treat Saddam’s arrest as a precursor to a calmer, safer Iraq – which would possibly mean a speedier recovery of the nation’s oil exports and lower oil prices.
Indeed, the more measured reaction by the petroleum complex Monday surprised many, but ultimately showed crude’s resiliency beyond even the expectations of most market bulls.
“This shows just how strong oil is, when even a story like this won’t keep prices down,” said Rick Bernstein, a New York assistant booth manager for NorthStar Oil Corp., an energy-brokerage firm.
“I’m bullish, but this has rallied a lot quicker than I thought it would,” said Michael Guido, a New York hedge fund strategist for Barclays Capital.
January light, sweet crude futures settled at $33.18 a barrel, rising 14 cents on the day. The front-month contract didn’t even graze last session’s low, but topped its high by 12 cents.
On London’s International Petroleum Exchange, January Brent settled down 5 cents at $30.32 a barrel.
Analysts say what remains to be seen is whether Saddam’s arrest will temper the frequency of attacks in Iraq, which has the world’s second-largest proven oil reserves next to Saudi Arabia.
Saddam’s capture didn’t prevent two bombings of police stations in Iraq Monday morning and may even lead to a spate of retaliatory assaults, market-watchers say.
Repeated attacks on the nation’s northern oil pipeline by saboteurs seen as loyal to Saddam have limited the nation’s oil-export outflows. Iraq is producing about 2 million barrels a day of oil, about 80 percent of its prewar total. Output from Kirkuk, in northern Iraq, is only about 200,000 barrels a day, but could rise to 900,000 barrels a day if the pipeline to the oil-export terminal at Ceyhan, Turkey, were secured, Iraq’s State Oil Marketing Organization has said.
In assessing the market’s wholesale dismissal of Saddam’s capture, Kyle Cooper, a Houston analyst for Citigroup, remained wary.
“It seems the market thinks it’s not going to have much of an effect, but quite honestly, I disagree,” he said. “I have a hard time believing it isn’t going to have any effect – at least psychologically – on those who support (Saddam).”
The next several days may be pivotal in gauging whether Saddam’s removal actually helped improve Iraq’s stability, Cooper said, echoing the sentiments of other analysts.
“Terrorists may want to show they’re still viable,” he said.
But in the long run, Saddam’s role may not matter much when compared with shrinking commercial U.S. oil inventories, increasing cold-weather demand for heating fuels and expectations that the Organization of Petroleum Exporting Countries may cut its output further in February, analysts say.
“No one cares about Saddam, and they shouldn’t,” Guido said. “This is clearly an immediate reaction to where the market is at.”
On the Nymex, January heating oil futures settled down 0.50 cent at 92.06 cents a gallon, while gasoline for the same month settled up 0.24 cent at 90.28 cents a gallon.
Natural gas for January delivery plunged 26.7 cents to settle at $6.954 per 1,000 cubic feet.
Ample distillate inventories, which include heating oil and diesel fuel, are putting pressure on heating oil prices, analysts say. Conversely, gasoline futures are reflecting crude’s momentum.
