Oil Steadies Near $50 as Bush Nears Win
Wed Nov 3, 2004
LONDON (Reuters) - Oil prices steadied on Wednesday as President Bush edged toward re-election, a result which traders said could bolster fuel demand and underpin anxiety over security of Middle East supply.
U.S. light crude (CLc1: Quote, Profile, Research) peaked in Asian trading at $51.20 a barrel before drifting to $49.78, a 16-cent gain on the day that stems a $6 pull-back over the past week. Brent crude (LCOc1: Quote, Profile, Research) was up 8 cents at $46.63 a barrel.
White House Chief of Staff Andy Card said Bush had a "statistically insurmountable" lead in the pivotal state of Ohio but will hold off a formal victory declaration to give Democrat John Kerry "time to reflect" on the results.
Traders said a second Bush administration likely would continue filling U.S. emergency oil stockpiles and could stoke nerves about U.S. policy in the Middle East, particularly OPEC's second-biggest producer Iran.
Prices had tumbled from last week's record high at $55.67 on speculation that a win for Kerry would halt deliveries into the Strategic Petroleum Reserve (SPR), and do more to encourage energy conservation.
"A Bush status quo results in somewhat higher oil prices both in the short and the longer term in my view," said Tim Evans, analyst at IFR Energy Services.
"In the short run, it means more oil drained from the market into the SPR."
Bush plans to fill the final 30 million barrels of the 700 million barrel reserve by next year, and some traders think a second Bush administration could consider expanding the SPR to one billion barrels.
"A Bush victory will be big for oil demand and keep prices high," said Phil Flynn, an analyst at Alaron Trading in Chicago. "Not only will the SPR be filled but I think they may expand it."
Traders also fear further instability in the Middle East, a factor that has fueled oil's rise of more than 50 percent this year.
"In particular, if another Bush government moves on to Iran, then oil prices would go very high and really threaten China's economic development," said Andy Xie, Morgan Stanley's chief Asia economist.
In Iraq saboteurs carried out the biggest attacks yet against the northern pipeline infrastructure on Monday evening, forcing Baghdad to halt 300,000 barrels per day of exports via Turkey.
The pre-election price fall was fueled by a build in U.S. crude stocks, easing some concern about winter fuel supplies that are significantly below 2003 levels.
Weekly U.S. oil inventory data, out at 1530 GMT on Wednesday, is expected to show higher crude stocks but another fall in distillate fuel, including heating oil and diesel.
China's economic expansion has driven the fastest growth in world oil consumption for a generation this year, but signs of slowing world economic growth also have helped ease prices from the highs.
Some nations face economic recession if oil stays above $40 a barrel, the International Energy Agency (IEA)'s chief economist said on Wednesday.
"At this price level, not just above $50 but also above $40, Europe and developing countries are in risk of recession," Fatih Birol told reporters in Rome.
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