Oil prices higher despite Saddam arrest

Crude oil prices closed narrowly higher on Monday as traders backed away from ideas the arrest of deposed Iraqi leader Saddam Hussein would lead to increased stability and more Iraqi oil exports.

In other featured commodity trade, gold closed lower in choppy trade after an early surge in the U.S. dollar. Wheat futures declined on sluggish export demand.

At the New York Mercantile Exchange, nearby crude oil futures closed above $33 a barrel for the second straight session, despite a weaker trend in overnight electronic trading.

“The market seemed to decide that capturing Saddam will not immediately bring more Iraqi oil,” said Nauman Barakat, senior vice president and trader at Refco.

The initial bearish reaction, based on the view that Saddam’s capture could mean less pipeline sabotage and more Iraqi oil exports, was tempered by fresh violence Monday.

Suicide car bombings at two Baghdad-area police stations killed nine people Monday and shattered any hope of a swift end to violence after Saddam’s capture.

Iraqi Oil Minister Ibrahim Bahr al-Uloum said Saddam’s arrest would help improve security, but Uloum said he could not rule out further attacks on the northern export line.

Iraq’s exports of more than 1.5 million barrels per day (bpd) from its southern Basra oil terminal in the Gulf are on track, Uloum said, with a target of 2 million bpd intact for the end of the first quarter next year.

NYMEX January crude settled 14 cents higher at $33.18 a barrel. In London, IPE January Brent crude ended 5 cents lower at $30.32 a barrel.

NYMEX January heating oil settled 0.50 cent lower at 92.06 cents per gallon. NYMEX January gasoline settled 0.24 cent higher at 90.28 cents per gallon.

At the COMEX in New York, gold futures closed lower in choppy trade, rebounding from early declines as the U.S. dollar turned weaker and made gold cheaper in foreign currencies.

Buying in gold briefly lifted futures into positive territory before prices turned narrowly weaker by the close.

“It was all relative to gold’s inverse relationship to the dollar, which was moving around on the back of the Hussein news,” Alaron Trading analyst David Meger said.

Benchmark February gold settled 20 cents lower at $409.90 an ounce after trading as low as $405.30.

As with oil, political instability was a factor in the precious metals market, boosting demand for safe-haven gold while pressuring the dollar.

The greenback lost its grip on gains against the euro following the two deadly car bombs in and near Baghdad, which fueled concerns Saddam’s capture would not mean an end to security worries or limit the cost of the U.S. occupation.

The euro scored a fresh lifetime high of $1.2323 Monday afternoon, rising from Monday’s low at $1.2135.

At the Chicago Board of Trade, wheat futures closed lower on a slower export sales pace for U.S. wheat and a round of profit-taking by speculators after Friday’s rally.

CBOT March wheat closed 7 cents lower at $3.86-1/2 per bushel. CBOT January soybeans closed 3-1/4 cents lower at $7.73 per bushel. CBOT March corn closed 1 cent higher at $2.53-1/2.

Some traders said the wheat market may have grown weary of waiting for China to buy a large amount of wheat from the United States. There has been talk recently that China next year might buy up to 3.0 million tonnes of wheat on the world market, with roughly 1.0 million coming from the United States.

So far, China has not shown its hand as an aggressive purchaser of U.S. wheat. Last week, China signed a deal to buy 500,000 tonnes of Canadian wheat in 2004.