Energy futures slide on fears of supply glut: Report

Crude-oil and petroleum-products futures fell sharply Thursday on worries that a quick resumption of Iraqi oil exports will lead to a global supply glut.

Crude oil set for May delivery fell $1.39 to settle at $27.46 a barrel at the New York Mercantile Exchange. May heating-oil futures lost 2.68 cents to 73.20 cents a gallon. May gasoline tumbled 4.11 cents to 83.46 cents a gallon, and May natural gas rose 22.4 cents to $5.419 per million British thermal units.

Kurdish fighters moved into the Iraqi oil city of Kirkuk Thursday, bringing the U.S.-led coalition a step closer to seizing Iraq's second largest oil field.

Coalition forces captured Iraq's southern oil fields in the early days of the conflict. Their attention now has turned to northern Iraq, the source of about half of Iraq's oil exports.

The disintegration of Saddam Hussein's regime has raised hopes that Iraqi oil, suspended since the start of the three-week conflict, will start flowing soon, analysts said.

That perception, along with bearish comments by officials of the Organization of Petroleum Exporting Countries, raised worries that the market may be flooded with oil, a sentiment that put downward pressure on prices.

In the weeks leading up to the war, Iraq exported about 1.7 million barrels a day of crude oil. Iraq suspended its exports on the eve of the conflict, and coalition officials said later that Iraqi oil may remain off the market for up to three months.

But a news report Thursday quoted an adviser to U.S. commander Gen. Tommy Franks as saying U.S. forces are hoping to pump 200,000 barrels to 800,000 barrels a day from the southern fields in less than three months.

"This caught the market by surprise and brought in fresh selling," said Peter Beutel, an analyst at Cameron Hanover.

The prospect of Iraqi oil hitting the market again has members of OPEC worried.

In the months leading up to the war, OPEC sharply increased its output to prevent a shortage resulting from supply disruption in the Persian Gulf.

Now, OPEC members are worried that the return of Iraqi oil may lead to a supply glut during the weak-demand third quarter, putting further downward pressure on prices.

OPEC President Abdullah Hamad bin Al-Attiyah said there is a surplus of at least two million barrels a day in the market and warned that this could rise to four million barrels a day if Nigerian output returns to normal and Iraq resumes production.

OPEC is scheduled to meet later this month or early next month to discuss production policy. OPEC officials have indicated in recent days that they may have to scale back production to keep prices stable.

Asked whether OPEC should rein in overproduction and leave output quotas unchanged or change the output ceiling, Mr. Al-Attiyah, who is also the oil minister for Qatar, said, "All options are open."

If the extra crude isn't removed from the market, the group's basket price could fall to the bottom end of its preferred $22-$28 a barrel price range, he said.

The basket price averaged $25.59 a barrel Wednesday, up from $25.33 Tuesday, OPEC's official news agency reported Thursday. (*)