Crude futures hit 2-month low as Iraq gains self-rule
By Gavin Evans
Bloomberg News Service
NEW YORK — Crude oil futures fell to a two-month low after the U.S.-led coalition authority handed sovereignty to Iraq two days ahead of schedule, easing concern about terrorist attacks in the Middle East's fifth largest oil-producing nation.
Iraqi Foreign Minister Hoshyar Zebari said yesterday that the handover to an interim government shows that Iraq is ready to tackle terrorists who are trying to undermine the country.
As the United States was transferring power to Iraq, a bomb blast killed a British soldier in the southern city of Basrah, the Ministry of Defense said. Today, Al-Jazeera television said on its Web site that a terrorist group killed a U.S. soldier it had held hostage since April 9.
"These acts of terror have really kept the market on pins and needles," said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Conn., energy consultant. "Even though we may not see a whole heck of a lot less of them, I think the fact that now Iraqi sovereignty is here is giving some people a sense of relief."
Crude oil for August delivery fell as much as 29 cents, or 0.8 percent, to $35.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Yesterday, the August crude contract fell $1.31, or 3.5 percent, to $36.24 a barrel, the lowest closing price for a contract closest to expiration since April 21. Oil has fallen 14 percent from a record close of $42.33 on June 1.
Coalition administrator L. Paul Bremer handed legal authority to Iraq's Chief Justice Medhat Mahmud in a ceremony at 10:26 a.m. local time yesterday, formally ending the coalition's 15-month occupation of Iraq.
"This at least is a psychological victory for the forces of stability in Iraq," said Beutel. "We've taken away a couple key days where these terrorists could really have halted the transfer."
Iraq, which holds the world's third-largest oil reserves according to BP Plc, has suffered almost daily attacks against security forces or oil infrastructure, including sabotage to pipelines that halted exports earlier this month.
Although Iraq now has legal authority over its affairs, the government doesn't yet have control over its borders and will rely on about 150,000 U.S. and allied soldiers for internal security while police and armed forces are trained.
"We suspect that terrorists will go ahead with planned attacks in Iraq regardless of the handover," Michael Fitzpatrick, a broker with Fimat USA Inc. in New York, said in a report.
Prices fell early yesterday after Iraq restored normal exports through its Persian Gulf terminals Saturday.
Exports of 1.68 million barrels a day were halted June 15 after attacks on two pipelines that supply the country's Basra and Khor al-Amaya terminals.
U.S. oil and gasoline prices rose to records last month amid concerns the country's fuel supplies were not rising fast enough to meet demand during the summer motoring season.
Gasoline demand traditionally peaks between the Memorial Day holiday in late May and the Labor Day holiday in early September.
