Oil prices fell sharply on Monday on speculation that a US election win for Senator John Kerry could ease the geopolitical friction that has helped fuel this year's record-breaking rally. US light crude settled down $1.63 to $50.13 after diving as low as $49.30 a barrel, breaking below $50 the first time in nearly a month. US crude peaked a week ago at $55.67 a barrel. In London, Brent crude lost $1.92 to $47.06 a barrel.
Energy analysts said a win for the challenger Kerry in Tuesday's US presidential election could mean lower crude prices than if President George W. Bush were re-elected. Latest opinion polls can barely separate the two.
"Under a Kerry administration we'd likely have a much more interventionist SPR policy," said Jamal Qureshi, market analyst at PFC Energy in Washington. "And when you look out a bit further, Bush is more likely to be aggressive in the Middle East, particularly in Iran."
The Bush administration continues to add crude to the SPR, the national strategic petroleum reserve, despite high prices.
Kerry says he would stop filling the reserve at current prices to keep more crude on the market. That difference is important for a world oil market suffering a shortage of light, sweet crude, which makes up about 40 percent of the SPR.
"A Bush status quo results in somewhat higher oil prices both in the short and the longer term, in my view," said Tim Evans, senior analyst at IFR Energy Services.
PFC is forecasting an average US crude price of $43 a barrel in 2005 should Kerry win, compared with $48 a barrel in the event Bush triumphed. It sees $52 on average in the first quarter 2005 under Bush compared with $45 under Kerry.
PFC said a Bush win could stoke nervousness about US policies in the oil-producing Middle East, while Kerry is seen as more likely to work through diplomatic channels.
A Kerry victory could also mean more financing for renewable energy sources and trigger a push for tighter mileage standards for gas-guzzling sport utility vehicles.
"Conservation, in my opinion, is the only way to get us out of this hole which we put ourselves in," said Fadel Gheit, senior energy analyst at Oppenheimer & Co.
Kerry backs a 10-year, $30 billion energy package that includes $10 billion to build cleaner coal-fired power plants and $10 billion to help US auto makers retool to build more fuel-efficient cars.
A Reuters survey released on Monday showed growth in manufacturing slowed from the eurozone to Japan in October.
Also undermining oil on Monday was last week's restoration in US Gulf of Mexico output from September's Hurricane Ivan. Production rose nearly 100,000 barrels per day last week to over 80 percent of the normal 1.7 million bpd.
In addition, producer Shell said Monday it would delay engineering work on its 150,000 bpd Gulf of Mexico Mars platform from November until early 2005.
SINGAPORE: Oil prices extended their bounce from three-week lows on Monday, climbing back above $52 amid jitters over thin global winter fuel stocks and this week's presidential election.
US light crude rose 51 cents to $52.27 a barrel in Asian trading, extending a jump that helped prices recover from Friday's $50.47 low, the weakest since October 5.
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