Oil prices held steady on Thursday, September 13, around $28 a barrel ― close to levels that prevailed before Tuesday's terrorist attacks on New York and Washington.
A barrel of Brent North crude for October delivery was selling for $28 in late trade, against $28.02 overnight. The US market remained closed on Wednesday.
Prices have now given back most of the four-dollar gain racked up on Tuesday in a frantic reaction to the hijacked aircraft strikes on the World Trade Center and the Pentagon.
Analysts said the reason for this was that traders were increasingly discounting the possibility of a major supply disruption resulting from US retaliation to the strikes. Some were instead factoring in dwindling prospects for world demand.
Demand was already expected to come under pressure this year, as the global economy slows up sharply. That situation is now expected to be aggravated as a result of the chaos on Wall Street, which is expected to tilt the US economy ever closer to recession.
"People are a little worried that a recession in the world could reduce demand for oil," said Christopher Bellew, a dealer with the Prudential Bache brokerage.
One immediate impact on demand involves airlines, which have had to cancel thousands of flights following the US chaos, meaning a sharp slump in demand for aircraft fuel. "Short-term demand will be going down because of the lack of airline flights," noted Peter Gignoux, an oil expert at Salomon Smith Barney. "I think the market will work lower."
Not everyone shared the view. At GNI brokerage, commodities expert Lawrence Eagles said that the falling oil prices was merely a reaction to the knee-jerk uptick in prices earlier in the week. "I don't see any reason, because of this attack, to become overly pessimistic on the US economy," Eagles said, predicting as a result a limited effect on oil demand.
With question marks nonetheless over demand, market watchers are predicting less upward pressures from the supply side. The fear had been that the terrorist attacks would set the United States against the Arab oil-producing world, jeopardising shipments, but much of the Arab oil world has condemned the attacks and offered to cooperate with the US probe.
"There seems to be further ebbing of the tensions in the oil market and in the fears that oil supplies could be interrupted," said Bellew. But he added that dealers were still bracing for the expected US retaliation, which could yet upset the oil market.
"The worry in the back of people's mind is that the Americans are undoubtedly going to retaliate in some way and that could influence oil supplies," Bellew told AFP. ― (AFP, London)
by Marie Wolfrom
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
