AMPLE SUPPLIES LIMIT U.S. STRIKE'S OIL PRICE IMPACT
Ample supplies of OPEC crude weighing on
world markets helped limit and then reverse oil price gains
that followed the U.S. Strike on an Iranian oil platform in the
Gulf earlier on Monday, analysts said.
    December loading rose to 19.65 dlrs, up 45 cents before
falling to around 19.05/15 later, unchanged from last Friday.
    "Fundamentals are awful," said Philip Lambert, analyst with
stockbrokers Kleinwort Grieveson, adding that total OPEC
production in the first week of October could be above 18.5 mln
bpd, little changed from September levels.
    Peter Nicol, analyst at Chase Manhattan Bank, said OPEC
production could be about 18.5-19.0 mln in October. Reuter and
International Energy Agency (IEA) estimates put OPEC September
production at 18.5 mln bpd.
    The U.S. Attack was in retaliation of last Friday's hit of
a Kuwaiti oil products tanker flying the U.S. Flag, the Sea
Isle City. It was struck by a missile, believed to be Iranian,
in Kuwaiti waters, and was the first hit on a U.S. Flag
commercial vessel in the seven year Iran/Iraq war.
    The U.S. Owned Liberian flag tanker Sungari was hit in the
area on Thursday, also believed struck by an Iranian missile.
    Refiners were not significant purchasers of physical oil on
Monday as a result increased Gulf tension following the U.S.
Attack, analysts said.
    They said a closure of the Strait of Hormuz, through which
around eight mln bpd passes, isnlikely because it is not in
the interests of the U.S. Or Iran, they said.
    Any threat to oil supplies would stem from an increase in
the number of tanker attacks as part of a widening of Gulf
hostilities, analysts said.
    But they saw the U.S. Strike as a limited reply to Iranian
missile attacks, with some describing it as responsible.
    Geoffrey Pyne, analyst at stockbrokers Phillips and Drew,
said he was impressed by the sensible U.S. Response.
    "The U.S. Has thought carefully about what would correspond
to Iranian agression. They have proved to the Iranians that any
further action will be met with a like-for-like response.
Today's action by the U.S. Was not escalatory," Pyne said.
    Kleinwort Grieveson's Lambert said the U.S. Strike was "a
responsible retaliation," with the U.S. Apparently indicating to
Iran that it could increase the severity of its attacksf Iran
chose to raise the level of conflict.
    Chase Manhattan's Nicol took a different view, however.
    He said he was unable to see what the U.S. Had achieved as
Arab states such as Kuwait and Saudi Arabia, whose interests
the U.S. Is supposedly defending, will feel less secure as a
result of the U.S. Attack and fear some sort of Iranian
retaliation.
    The initial upward market move this morning reflected a
strong speculative reaction to rumours of a U.S. Attack which
was thought at one stage to have been against Iranian missile
launchers on the Faw Peninsula, close to Kuwait, analysts said.
    The later downtrend followed confirmation of a U.S. Navy
attack on an Iranian oil platform by the U.S. Defence Secretary
Caspar Weinburger.
    Market operators were able to evaluate the situation in the
Gulf on the basis of confirmed fact, and finding it less
serious than first thought, took profits, taking prices lower,
analysts and traders said.
 REUTER
