960419

Crudes in Asia shed

21 pc on week amid

Iraq fears

SINGAPORE: Crude oil prices in Asia tumbled further on Friday, bringing losses for the week to 21 percent as traders feared the possible return of Iraqi oil to world markets.

In Asia oil prices were down 50 cents to $1.00 per barrel from Thursday as traders, concerned Iraq could soon strike a deal with the U.N. on limited oil sales, resumed their profit-taking after a 10-week rally.

By 0730 GMT, benchmark crude oil Brent for June was valued at $18.30, down 21 percent from the $23.30 five-year high hit late last week.

U.S. West Texas Intermediate (WTI) crude was down nine percent at $23.39 around 0730 GMT, compared with a five-year high on Tuesday of $25.70.

Malaysian Tapis crude prices were off $1.00 on the week at $20.45.

Diplomats close to oil talks between the United Nations and Iraq said a deal could be struck as early as next week, a prospect that has raised fears of a rise in global supplies.

The talks centre on a proposal which would allow Iraq to sell oil to raise $2 billion over six months for food and humanitarian supplies. It has been under crippling United Nations sanctions since it invaded Kuwait in 1990 and has been forbidden to export oil, except small quantities to Jordon.

At the end of the first six months, the deal could be renewed for a similar term.

The extra oil -- which could amount to 700,000 barrels per day -- would seriously undermine world prices.

"It's not just the prospect of Iraq being allowed to sell oil over six months that is worrying the market. It's the fact that the agreement is renewable, so the market is assuming once Iraq oil is back, it will be back to stay," one Singapore-based trader said.

Chief Iraqi negotiator Abdul Amir al-Anbari told reporters on Thursday he expected to stay in New York until perhaps Monday or Tuesday. Asked if the talks would conclude successfully, he said "I hope so," adding, "We will see."

Western diplomats said it was possible the latest round of talks could conclude without a deal and go into another round. But they said much could happen between now and next week and a deal could be concluded.

U.N. Secretary-General Boutros Boutros-Ghali, who has taken a keen personal interest in the talks, is due to leave for South Africa on Wednesday, raising expectations that some definitive word on the negotiations would be forthcoming by then.

Some traders said oil prices could drop another $1.00 at least if the U.N. and Iraq reach an accord.

But Tom James, an analyst/broker who follows Asian markets at Euro Brokers in London, said prices had already fallen partly in anticipation of Iraq returning to the world market.

"I don't really expect to see the market come off that much," he said.

Many crude oil users, most noticeably in the United States, have allowed stocks to run low in anticipation of cheaper prices if Iraq returned to the market.

So, if a deal is concluded, some traders argue the price of forward deliveries of crude could well rise as buyers return to build up their depleted stocks in preparation for the U.S. summer driving season.

Stocks in the United States have fallen to 20-year lows, although this was partly aggravated by a longer-than-expected winter.-Reuter