The price of crude oil fell sharply yesterday in part because a promised television appearance by Iraqi President Saddam Hussein failed to materialize, leading some traders to speculate anew about his whereabouts and whether he is still alive.
The fresh doubts about Hussein's fate, in addition to news that Nigeria's biggest labor federation called off a threatened strike of oil field workers, helped push down the May delivery price on the New York Mercantile Exchange by $1.26, or 4.1 percent, to $29.78 a barrel. A strike almost certainly would have further curtailed production in Nigeria, which lately has been torn by ethnic violence.
The price of crude has fluctuated almost hourly on world oil markets during the two-week-old war as traders try to discern how long the conflict might last and how long Iraq's 2 million barrels a day of export production might be kept off the world market.
State-run Iraqi TV had announced that Hussein would deliver a statement on the war. Instead, the country's information minister read a statement that he said came from Hussein urging defenders to continue to fight against the invasion.
"What you see is the fact that Hussein didn't show up, and potentially that could lead to ending the war sooner," said John C. Felmy, chief economist for the American Petroleum Institute.
Felmy said that despite the no-strike proclamation in Nigeria, which was the fourth-biggest source of U.S. oil imports in January, the major oil producers there are "not going to return until they know it's safe." Nigeria's production of 1.9 million barrels a day has been trimmed by 800,000 barrels as several major producers pulled out their workers because of tribal warfare near the oil fields and civil unrest in advance of planned April 19 national elections.
"The Nigeria problems are not going to go away anytime soon," said Jay Saunders, an energy analyst for Deutsche Bank AG in New York. "They'll go through the 19th."
Moreover, he said that despite yesterday's drop in crude prices, other factors might well point toward higher oil costs, which in turn influence the price motorists pay for gasoline. Crude accounts for 40 to 50 percent of the cost of a gallon of gas. He said demand for crude will be higher than usual in the second quarter partly because the extended cold weather in the United States will force refiners to continue to use some crude for heating oil before turning toward production of gasoline for the summer driving season.
In addition, he said, gasoline inventories might total 200 million barrels by early June, down from the five-year average of 210 million, another factor that is likely to contribute to higher crude prices.