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Gignoux: Oil trend still down
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December 17, 1998: 10:44 a.m. ET
Despite U.S. attack on Iraq, prices likely to stay low as OPEC glut continues
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NEW YORK (CNNfn) - Buy on the rumor, sell on the news. That's in part what crude oil investors did in connection with U.S. air strikes on Iraq. A strong rally in the price of crude Wednesday in anticipation of the military actions was followed by a retreat in London Thursday morning.
Among the factors accounting for the decline is the fact that markets and analysts alike have shrugged off fears Iraqi oil exports will be disrupted in light of the aggressions and that the United States might attack Iraqi oil installations.
"I would expect that they'd steer clear of the oil installations. They're fundamental to the oil-for-food process," said Peter Gignoux, manager of the petroleum desk at Salomon Smith Barney in London
Gignoux, who spoke with CNNfn's "Business Day," noted that among the clients for Iraqi oil exports on the next few days' load schedule are the French, the Taiwanese, the Russians, "any number of clients in the Mediterranean," and the United States itself.
Under the food-for-oil program, Iraq exports 1.6 million barrels per day.
The drop in oil prices following Wednesday's rally doesn't surprise Gignoux, who said, "Yesterday's rally was based on a number of factors. There was some financial geometry in there as well. It was an options expiry day on the New York Mercantile with a rising market. That gave it a little more oomph than it needed. Now that oil's flowing, prices are coming back in line."
Indeed, the bombing of Baghdad is having relatively little effect on the depressed oil market overall, Gignoux noted, pointing out that prices were at $16 at the beginning of the year and are now down around $11 to $12, even after the rallies. Broadly speaking, he said, "the trend remains down.
"Oil's been in crisis all year long. The prices have been under pressure. OPEC's had a couple of failed outings. … It's well regarded that the Asian economies and the weather's been a factor, but the fact remains that OPEC is still overproducing for the market and as a result you're putting oil into storage, and that creates the overhang and it becomes the vicious circle." 
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