World oil markets Friday shrugged off President Bush's disclosure that Iraq was systematically destroying Kuwait's oil industry, and after a brief surge prices continued to slide because of excess crude supplies.
The benchmark U.S. West Texas Intermediate crude for April delivery ended the day down 59 cents from Thursday to $17.91 a barrel on the New York Mercantile Exchange, about the level prior to Bush's statement. The crude lost $1.03 on the week.This was the first time WTI crude closed below $18 a barrel on the Merc since mid-July.
"It bounced quickly but it didn't last too long," said Tom Bentz, director of trading at United Energy Inc. in New York. He said the bounce was about 40 cents a barrel.
"We learned this morning that Saddam has now launched a scorched earth policy against Kuwait, anticipating perhaps that he will now be forced to leave," Bush said, in giving Iraq an ultimatum to start evacuating occupied Kuwait by noon Saturday.
In his White House statement, the president added: "He is wantonly setting fires to and destroying the oil wells, the oil tanks, the export terminals, and other installations of that small country. Indeed, they are destroying the entire oil production system of Kuwait."
"The market is viewing it that Kuwaiti production has been out of the market anyway," Bentz said.
The United Nations imposed an embargo on Iraqi and Kuwaiti exports shortly after Iraq's Aug. 2 invasion of its Persian Gulf neighbor. Saudi Arabia and other members of the 13-nation Organization of Petroleum Exporting Countries have since made up for the two nations' 4 million barrels of daily oil output.
Bob Baker, senior energy analyst with Prudential-Bache Securities, Inc. in New York, said there's downward pressure on oil prices because of the "overhang" of world crude supplies.
Many traders feel that the OPEC cartel will have to limit production of its members at its March 8 meeting if even current prices are to be supported, Baker said.
Traders were looking for WTI crude to fall to the $16-a-barrel range once a psychologically important support level had been breached at $18, which the April delivery WTI contract had either hit or approached three times in the last month.