London, April 7 (Reuters): Oil prices tumbled on Monday as US forces raided central Baghdad, raising expectations of an end to the war against Iraq in short order. News that Iraqi exiles and US officials agreed at a meeting on Saturday that Baghdad should stay in Opec post-war, but with no production cap, also undermined prices.
London brent crude fell to $ 23.40 a barrel, its lowest since mid-November before recovering to $ 24 at 1300 GMT, down 68 cents. US crude futures fell 82 cents to $ 27.80 a barrel. American forces burst into the heart of Baghdad on Monday and entered two of President Saddam Hussein’s palaces, but Marines hit tough resistance at key bridges on the capital’s eastern flank.
US officers described the assault as a show of force rather than a final attack to take Baghdad, key prize in the 19-day-old war to oust Saddam.
British forces were in control of most of Iraq’s main southern oil city, Basra, but faced resistance in Basra’s old town, British spokesman Al Lockwood said.
“I think this is it. Basra will fall, Baghdad will fall. The resistance that everyone was fearing does not appear to be there,” said Andrew Brookes, defence analyst at London’s International Institute for Strategic Studies.
“The expectations are that if Baghdad falls, there will be no need to fight for the oilfields. The fall of Baghdad signals a peaceful handover of the rest of Iraq’s oilfields,” said Sydney-based oil analyst Simon Games-Thomas.
Oil has slumped 30 per cent in the last month as fears in the market of war losses to Middle East production outside Iraq were not realised.