UNCERTAINTY IN THE FINANCIAL MARKETS : After Hectic Day, Calm Returns to Oil Futures Markets

Crude oil prices Friday failed to top the record highs of the day before and closed practically unchanged in a day of skittish trading marked by a lack of news from the Middle East.

Crude oil for November delivery closed down just 3 cents a barrel from Thursday’s record close, settling at $39.51 a barrel. Crude oil for later months closed slightly higher.

The uneventful trading was in sharp contrast with the frenetic buying of the day before, when rumors of war drove crude oil prices briefly above $40 a barrel for the first time since crude futures began trading on the New York Mercantile Exchange seven years ago.

“It was a quiet day,” said Peter Beutel, an oil analyst with Pegasus Econometric Group Inc. in Hoboken, N.J. “There’s a reluctance to buy or to sell. . . . Many people I’ve talked with today are breathing a collective sigh of relief.”

Overall, crude oil prices on the mercantile exchange have gained $4.08 a barrel in the last week and more than $18 since the Aug. 2 invasion of Kuwait by Iraq.

Prices rose at the opening Friday but peaked at $39.95, suggesting resistance at the psychological barrier of $40.

“I think people were very cautious and wanted maybe to reduce their exposure a little bit going into the weekend, and they didn’t want to take on any new positions,” said James R. Fiedler, a broker with E D & F Man International Futures Inc. in New York.

Prices then fell as traders took profits, spurred partly by news that the House had agreed to triple the proposed 5-million-barrel test drawdown of crude oil from the 590-million-barrel Strategic Petroleum Reserve. The low during the trading day was $38.65 a barrel.

The low prices sparked renewed buying, and prices picked up near the close, nearly reaching Thursday’s level. “With the threat of war out there, people are afraid to be too short,” said Tom Bentz, director of trading at United Energy Inc. in New York.

One reason: Sunday is the birthday of the Islamic Prophet Mohammed, a likely occasion for more harsh words from Iraqi President Saddam Hussein.

On Thursday, traders paid little attention to President Bush’s announcement that he would begin tapping the strategic reserve in an effort to cool overheated markets. As prices went through the roof that day, Administration officials backed off statements that the test drawdown was intended to lower oil prices.

But Energy Secretary James D. Watkins let it be known to House leaders that he would favor increasing the drawdown to 500,000 barrels a day, and the House voted for the change Friday.

Still, the news did not quell fears that war may break out and threaten worldwide oil shortages, fears that are keeping oil prices firm, traders said.

The International Energy Agency, which met Friday in Paris, did little to allay those anxieties: It ruled out following Bush’s lead and tapping strategic reserves of its 21 industrial country members.

The IEA did, however, ask its members to prepare for emergency drawdowns in the event of supply disruptions.

Beyond that, there was little of the paranoia of recent days to drive Friday’s trading, traders said. “There’s end-of-the-week profit taking. There’s a real lack of any fresh rumors. There’s no saber rattling,” said Sal Gilbertie, a trader with Merrill Lynch Futures in New York.

Prices for unleaded gasoline opened higher but closed lower as traders took profits as the month ended. Unleaded gasoline for October delivery closed down 0.93 of a cent at $1.0176 a gallon. Prices for later months also closed down.

Buying of home heating oil contracts was stronger as fears of winter shortages persisted, and home heating oil for October delivery closed up 0.61 cent a gallon at $1.0498. Contracts for later months also closed higher, except January, which was off a tenth of a cent.