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WASHINGTON -- The price of oil fell significantly on Monday, as traders viewed the transfer of political power in Iraq as a move that could reduce attacks against the country's oil infrastructure, reported the Associated Press.
Some additional pressure was taken out of the market late last week after the resolution of a labor dispute in Norway, the world's third-largest oil exporter.
"You have a lot of good news out there," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Light crude for August delivery traded at $36.12 per barrel in early trading on the New York Mercantile Exchange, down $1.43.
"I think the traders are really taking the news (of the power transfer in Iraq) as 'Boy, this may have some of the opposition in Iraq thinking twice before they start attacking oil pipelines,"' Flynn said. "Now instead of attacking the U.S. coalition, they're attacking the Iraqi government."
Another reason oil prices have eased is that Saudi Arabia said it would boost its output this month to 9.1 million barrels a day and would pump even more, if necessary.
But Flynn said there remains a level of nervousness in the market about the potential for terrorist attacks in Iraq, Saudi Arabia and elsewhere in the Middle East, adding that there exists a "terror premium" of several dollars per barrel to the price of oil.
Also, because of limited refining capacity in the United States, more oil on the market does not necessarily mean the country's supply of gasoline will increase significantly or that prices will drop dramatically, Flynn said. While the retail price of gasoline has fallen in recent weeks, the average cost at the pump nationwide is still about $1.94 per gallon.