NEW YORK -- Oil traders on the New York Mercantile Exchange put red-white-and-blue ribbons on their lapels yesterday morning and then patriotically torched the price of crude.
Concern about an imminent attack had most traders on the exchange thinking Wednesday that sharply higher prices were inevitable, but the price for the exchange's benchmark "sweet crude" plunged the $7.50-a-barrel limit on the first trade, freezing the market for an hour.
When it reopened, prices continued to fall, closing down $10.56, to $21.44, almost $2 a barrel below the price Aug. 1, the day before Iraq's invasion of Kuwait.
"Current trading has nothing to do with the price of oil," said Antonio Szabo, an oil analyst with Bonner & Moore Consultants Inc. in Houston. "It's people's perception of how the war is going."
In the morning, the perception shifted from bad to good.
But hours later, crude began rebounding as missiles hit Israel. Oil prices responded by jumping more than $3 a barrel in Tokyo cash trading.
Before the attack on Israel, Mr. Szabo said that the price might fall several more dollars a barrel, and Stephen Smith, an analyst with Bear Stearns & Co., predicted $15-a-barrel crude over the next two to three months.
Bryan Dutt of Howard Weil Corp. was even more aggressive, estimating that oil could fall to $10 a barrel in the coming months.
All three analysts, however, suggested that oil ultimately will rebound to near its current price as supply and demand come back into balance.
And, despite yesterday's plunge, traders were hesitant to discount the possibility that problems could push the price back up soon.
"We are optimistic about what happened, but it [the war] is far from over," said Rodney Dow, of Dow International Energy, a trader on the floor of the exchange.
His clients, major petroleum producers and users, weren't shedding their long-term holdings in petroleum, he said, which suggests that concern about higher prices is still lingering.
Still, yesterday's session felt strikingly different from from other recent sessions when ever higher prices was the pervasive concern, if not reality.
"Up to last night, there was fear and anxiety," said Lou Guttman, chairman of the mercantile exchange.
"Last night there was a physical change. . . . The possibility of a major offensive by Iraq has been diluted. . . . Unless that changes, the market should catch its breath and trade on lTC fundamentals, unlike in the past few months."
Indeed, other traders suggested that yesterday's session might have been one of the most relaxed ones in some time.
"The market has been as emotional as it could be over the past couple months," said Richard Schaeffer, a trader with Chicago Corp.