NEW YORK, JAN. 3 -- Oil prices dropped briefly today to their lowest levels since the day after Iraq invaded Kuwait as prospects for negotiation edged out fears of confrontation in the Persian Gulf.
On the New York Mercantile Exchange, oil for delivery in February closed at $25.48 per barrel, down $1.01 from Wednesday. At one point, prices sank as low as $24.90, the lowest price since Aug. 3. That followed a decline of $1.95 a barrel on Wednesday.
Oil prices, which were under $22 per barrel before Iraq invaded Kuwait on Aug. 2, climbed to $24.49 on Aug. 3 and peaked at $41.15 on Oct. 15. Today's closing price was the lowest since Dec. 12.
Analysts said the recent trend toward lower oil prices, which also reflects unusually warm weather in the last several weeks, and ample world oil supplies, should foster a continued drop in retail gasoline prices.
"We expect further decreases at the pump by about a nickel over the next couple of weeks," said Thomas Blakeslee, oil analyst at Pegasus Econometrics Group in Hoboken, N.J.
Gasoline prices have dropped to an average nationwide of $1.267 per gallon for unleaded regular, down from $1.387 on Dec. 4 but still higher than the $1.075 average before the invasion, the American Automobile Association said today. The price was the lowest recorded by AAA's weekly survey since Aug. 20, when a gallon of self-serve unleaded averaged $1.237.
"The impression is that war is not imminent and may never take place, while not too long ago it was assumed war was imminent," said John Lichtblau, chairman of the Petroleum Industry Research Foundation.
The analysts added, however, that despite the movement toward Persian Gulf talks, an enormous gap seems to exist between what Bush and Iraqi President Saddam Hussein each say they are willing to accept.
Heating oil, meanwhile, took an especially sharp drop on the New York Mercantile Exchange today, falling 3.06 cents to close at 70.24 cents a gallon. Since the invasion, it peaked at $1.078 per gallon on Oct. 10.