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LONDON -- Oil prices fell sharply on Monday on speculation that a U.S. election win for Senator John Kerry could ease the geopolitical friction that has helped fuel this year's record-breaking rally, according to Reuters.
U.S. light crude settled down $1.63 to $50.13 after diving as low as $49.30 per barrel, breaking below $50 for the first time in nearly a month. U.S. crude peaked a week ago at $55.67 per barrel. In London, Brent crude lost $1.92 to $47.06 per barrel.
Energy analysts said a win for the challenger Kerry in Tuesday's U.S. presidential election could mean lower crude prices than if President Bush were reelected. Latest opinion polls can barely separate the two.
The Bush administration continues to add crude to the SPR, the national strategic petroleum reserve, despite high prices. Kerry says he would stop filling the reserve at current prices to keep more crude on the market. That difference is important for a world oil market suffering a shortage of light, sweet crude, which makes up about 40 percent of the SPR.
"Under a Kerry administration we'd likely have a much more interventionist SPR policy," said Jamal Qureshi, market analyst at PFC Energy in Washington. "And when you look out a bit further, Bush is more likely to be aggressive in the Middle East, particularly in Iran."
"A Bush status quo results in somewhat higher oil prices both in the short and the longer term, in my view," said Tim Evans, senior analyst at IFR Energy Services.
PFC is forecasting an average U.S. crude price of $43 per barrel in 2005 should Kerry win, compared with $48 per barrel in the event Bush triumphed. It sees $52 on average in the first quarter 2005 under Bush compared with $45 under Kerry. PFC said a Bush win could stoke nervousness about U.S. policies in the oil-producing Middle East, while Kerry is seen as more likely to work through diplomatic channels.
A Kerry victory could also mean more financing for renewable energy sources and trigger a push for tighter mileage standards for gas-guzzling sport utility vehicles. "Conservation, in my opinion, is the only way to get us out of this hole which we put ourselves in," said Fadel Gheit, senior energy analyst at Oppenheimer & Co.
Kerry backs a 10-year, $30 billion energy package that includes $10 billion to build cleaner coal-fired power plants and $10 billion to help U.S. auto makers retool to build more fuel-efficient cars.