LONDON, 3 November 2004 — Oil prices continued their retreat yesterday, dipping below $50 in New York as Americans voted in a presidential election expected to send ripples through oil markets. New York’s main contract, light sweet crude for delivery in December, fell 35 cents to $49.78 a barrel in early deals.
US crude oil futures have slumped by over 10 percent from an Oct. 25 all-time summit of $55.67. In London the price of Brent North Sea crude oil for delivery in December lost 36 cents to $46.70 a barrel in late trading. All eyes were on the United States where the election race between President George W. Bush and Democrat contender John Kerry was too close to call.
Seth Kleinman, analyst at Washingtonbased PFC Energy said dealers were squaring positions ahead of two possible outcomes. “If it’s a victory for Bush, prices will revert back up to recent highs of $55 a barrel. If there is a Kerry victory, then there will be a very different pricing structure,” he said.
Analysts said the general feeling was that a win by Republican Bush would push prices higher because his policies would be likely to further fuel tensions in the Middle East. Meanwhile Kerry was expected to take a different line to Bush concerning the US Strategic Petroleum Reserve, if voted into the White House.
While Bush has ordered that the SPR be filled to its maximum 700 million barrel capacity to cushion the country in case of emergency supply shocks, Kerry has argued this makes no sense at a time of record high prices.
“The closer we get to the elections, the more Kerry looks stronger, and if he wins then there are stronger fuel efficiency drives on the horizon,” Deutsche Bank analyst Adam Sieminski said. “He may even sell some of the US emergency stockpiles to calm high oil prices,” he added.
Oil prices have tumbled from record highs close to $56 a barrel seen in New York last month as concerns about a possible supply crunch during the northern winter eased. Traders appeared unfazed by news that in northern Iraq, bombs ripped through four sections of oil pipelines, setting off fires and affecting production and exports, security officials said. Only a small amount of Iraq’s vital oil reserves flows from the north of the country, with the main outlet down in the south.
Elsewhere, markets were keeping a close watch over Nigeria, Africa’s largest exporter of crude, where union leaders have announced plans for an indefinite general strike to begin later this month.
A coalition of unions and civil society groups have vowed to stem the flow of oil when they launch an indefinite nationwide protest against rising domestic fuel prices on Nov. 16.
With exports of 2.5 million barrels per day, Nigeria is Africa’s biggest oil producer and the sixth largest in the world.
Its sweet, light crude is ideal for refining into petrol, and it supplies 15 percent of the key US market.
