Steve Quayle News Alerts

January 27, 2003
By Myra P. Saefong, MarketWatch.com

NEW YORK -- Crude futures slipped under $33 a barrel, while gold prices traded near the session's high above $372 an ounce at midday Monday after the U.N.'s chief arms inspector sought more time in the search for illegal weapons in Iraq.

On the New York Mercantile Exchange, the March crude futures contract traded at $33.06 a barrel, down 22 cents. Prior to the report, the contract fell to a low at $32.58.

February gold changed hands at $372.40, up $4 an ounce on Nymex, after trading earlier above $372.

Iraq hasn't yet accepted a U.N. demand that it forsake weapons of mass destruction, but is cooperating "on the whole" with weapons inspectors, chief inspector Hans Blix told the Security Council.

Blix said more work is needed to verify Iraqi compliance. Blix noted that many questions remain to be answered, including those regarding Iraq's development of missiles, and chemical and biological weapons.

In sum, Blix's testimony was "mixed at best," said Charles Nedoss, a gold analyst at Peak Trading Group. "There was no smoking gun, but there was compelling evidence that Iraq hasn't been fully forthright and has breached the U.N. agreement."

Todd Hultman, president of Dailyfutures.com said the U.S. and U.K. would likely "seize upon" Blix's comments that Iraq hasn't accepted the disarmament process to "strike Iraq."

"Other members of the Security Council are not swayed, but as [U.S.] Secretary General [Colin] Powell said this weekend, the U.S. is prepared to attack without the consent of the other members," Hultman said.

Also Monday, John Negroponte, U.S. ambassador to the U.N., called Iraq's 12,000-page report, which was submitted in December, "inaccurate." Negroponte said Iraq is "not cooperating unconditionally."

Jeremy Greenstock, British Ambassador to the U.N., said the situation wouldn't be resolved peacefully under the U.N. resolution unless the U.N. gets 100 percent cooperation from Iraq.

And on Tuesday, President George Bush "takes his case to the American people" in his State of the Union Address and "military action is likely to commence sometime in February," said Hultman.

Venezuela still in backseat

In other news Monday, Venezuela's oil strike entered its ninth week with OPEC Secretary General Alvaro Silva indicating the cartel is doing all it can to make up for the oil supplies lost in the strike.

"For the oil markets, a definitive end of the strike does not mean an immediate return to pre-strike output levels," analysts at Fimat USA told clients Monday. "It may take 30 to 45 days to get back to the 1.5 million barrel per day mark, with 45 to 60 days necessary to elevate production by an additional 1 million barrels per day."

The latest report on U.S. supplies failed to reveal much of an effect from the loss of production, however.

Early Thursday, the American Petroleum Institute reported that crude stocks rose by 181,000 barrels to total 272.4 million barrels in the week ended Jan. 17, up from 272.2 million a week earlier.

Last week, the Energy Department reported that inventories of crude climbed 1.5 million barrels to 273.8 million barrels as of the week ended Jan. 17, up from 272.3 million a week earlier. An update on supplies is due Wednesday morning.

Petroleum-product prices traded mixed. February unleaded gasoline fell by 0.25 cent to 92 cents a gallon. February heating oil traded at 96 cents a gallon, up 0.98 cent.

Natural-gas futures inched up 12.6 cents to stand at $5.65 per million British thermal units.

Over in the equities arena Monday, the Oil Service Index traded down 1.6 percent.

The Reuters/CRB Index, a broad-based measure of the commodity futures market, traded at 245.1, up 0.3 percent amid gains in gold.

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