The unexpected resistance by Iraqi military to the U.S.-led invasion caused a sharp rebound in crude oil prices yesterday as new concerns about a sabotage threat at oil wells in southern Iraq slowed allied attempts to secure the fields.
Crude oil for May delivery rose 6.5 percent on the New York Mercantile Exchange, to $28.66 a barrel, after having fallen for seven straight sessions based on expectations that U.S. and British forces would quickly overrun Iraq and soon restore its 2.5 million-barrel-a-day oil production.
Civilian firefighters hired by the Pentagon managed to extinguish fires at two of the nine burning oil wells in the Rumaila oil fields north of the Iraq-Kuwait border, dousing flames that had risen hundreds of feet into the air. But firefighters discovered yesterday that Iraqi forces had left explosive charges on top of, or buried near, some Rumaila oil wells. "It's the same technique they used in Kuwait. It's exactly what we expected them to do," said Les Skinner, an engineering director at Cudd Pressure Control Inc., a Houston company that fights oil fires.
That caused allied officials to make an abrupt about-face in their earlier assessment that the fields were secure, scrubbing a media tour planned to show journalists how the fires would be put out. Marine Capt. Danny Chung told reporters in Kuwait: "The Rumaila oil fields are unsafe. The trip is canceled."
British Prime Minister Tony Blair told Parliament in London yesterday that Iraq's "oil wealth was mined, and deep mined at that. Had we not struck quickly, Iraq's future wealth would even now be burning away."
Iraqi forces were not able to ignite most of the 500 wells in Rumaila -- or chose not to do so. Some charges were detonated but apparently were too weak to destroy pipe valves and set the wells ablaze.
Lt. Col. Eugene Pawlik, an Army Corps of Engineers spokesman, said crews from Houston-based Boots & Coots International Well Control Inc. put out two fires but added that an unknown number of the wells in the region were rigged with explosives.
Skinner said he understood that explosive charges had been placed around wells, with telephone wires leading away from them. An electric charge over the wires from a car battery could be used to set off a charge. "Certainly you've got to make sure they're safe" before attempting to extinguish fires or operate non-burning wells, Pawlik said.
Military ordnance-disposal teams will have to check and clear the fields before they can be brought back into use, said Skinner, whose company fought oil fires in Kuwait after the 1991 Gulf War and is currently advising Kuwaiti authorities.
Gen. Tommy R. Franks, commander of the allied forces, told a news conference at the U.S. Central Command in Qatar that about half of the shipping channels in the Persian Gulf leading to the southern Iraqi port of Umm Qasr, a key distribution point for Iraqi oil, has been cleared of mines.
The price of oil was also boosted by civil unrest in Nigeria, the fourth-largest source of U.S. oil imports in January. Several major oil companies have evacuated their staffs from Nigeria, Africa's largest oil producer, in the wake of violent fighting. TotalFinaElf SA, Europe's third-largest oil company, said five people were killed during its evacuation, including three of its Nigerian staffers.
Nigeria has lost about 800,000 barrels a day of oil production -- nearly 40 percent of its output -- dealing a new setback to the depleted U.S. inventories of crude oil and gasoline. "That's a big loss," said Andrew Lebow, an analyst at Man Financial Inc. in New York. "It comes at a really tough time."
"If that is sustained it is going to create some major pain," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation in New York. The Bush administration will have to carefully monitor supplies to see whether a release of crude oil from the U.S. Strategic Petroleum Reserve is needed to prevent shortages and price spikes, he said. "They are monitoring it and still have some time to assess the situation."
The rebound in oil prices was fundamentally a backlash from the optimism of oil traders at the war's outset, analysts said. "People now perceive the war is not going as quickly as they thought," said Thomas J. Herlihy, a broker with Spectron Energy Inc. in New Caanan, Conn. Many large energy companies and financial firms stayed out of the oil market yesterday, he added. "You don't get a clear picture where the market wants to go."