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Oil Prices Fall As Traders Take Profits

Posted on: Monday, 6 February 2006, 18:00 CST

By MADLEN READ

NEW YORK - Oil prices slipped Monday when traders took profits after prices surged on fears that Iran might halt oil exports, and after a cold front in the northeastern United States was milder than expected.

Light, sweet crude for March delivery fell 26 cents to settle at $65.11 a barrel Monday on the New York Mercantile Exchange.

The contract had risen as high as $66.62 earlier in the day.

Iran said it would start uranium enrichment and bar surprise inspections of its facilities, and traders worried the dispute between the United Nations and Iran could disrupt supplies from OPEC's second-largest oil producer.

Still, above-normal U.S. temperatures led traders to take profits - heating oil supply is ample and demand isn't high.

"If it were cold outside, we'd be at $70 a barrel," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "What's been saving this market has been unseasonably warm temperatures. The warm temperatures have been keeping us well grounded."

A cold front entered the Northeast over the weekend, but temperatures between Washington, D.C., and Boston hit about 40 degrees Monday, and the heavy snow was limited to the Great Lakes area, according to Accuweather.

Natural gas plummeted 61.8 cents to settle at $7.995 per million British thermal units; gasoline fell 3.75 cents to settle at $1.6442 a gallon; and heating oil fell 1.88 cent to settle at $1.7628 a gallon.

Brent crude for March edged 6 cents lower to settle at $63.33 a barrel on London's ICE Futures exchange.

Iran's announcement Sunday came after the International Atomic Energy Agency reported the nation to the U.N. Security Council over its nuclear program. Iran insists it only wants to generate electricity, but the United States and some of its allies contend Tehran is trying to build a weapon.

The Islamic republic left the door open for further negotiations over its nuclear program and, in an apparent softening of its position, said it was willing to discuss Moscow's proposal to shift large-scale enrichment operations to Russian territory in an effort to allay suspicions.

An Iranian official at the IAEA meeting in Vienna, Austria, had said that proposal was "dead." The comment was made after the IAEA's 35-nation board of governors voted to report Iran to the council, which has the power to impose economic and political sanctions.

Dominic Bryant, an analyst at BNP Paribas, said that while Iran's referral was widely expected, it is still a significant milestone in the dispute, which will be protracted.

Flynn said the dispute will continue to affect energy markets, and traders "are waiting for the next headline."

Also Monday, the head of the International Energy Agency, Claude Mandil, said he expected no downturn in world demand for OPEC's crude oil in the historically weaker April-June period.

The Organization of Petroleum Exporting Countries has said the world's implied need for its crude in the second quarter is 2.4 million barrels a day below the estimated 30 million barrels a day that was needed - and is currently produced - in the first three months of this year.

OPEC said in its report earlier in January that outright world oil demand would fall more than 2 percent in the second quarter, compared with the first three months of the year.

Worries over supplies from Iraq and Nigeria persist. Insurgents have targeted oil installations in Northern Iraq in efforts to cripple the country's infrastructure. Nigeria's exports have been reduced because of recent violence against oil companies. Insurgents have blown up pipelines and have taken oil workers hostage over the past months.

Tension between the United States and Venezuela, the fourth-largest exporter of oil to the U.S., is also keeping oil prices high.

President Hugo Chavez said Sunday that Venezuela's opposition may boycott upcoming presidential elections if they cannot decide on a single candidate, part of what he called a U.S.-backed plan to destabilize the country.

Source: Associated Press/AP Online

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