Sydney, April 11 (Bloomberg) -- Crude oil fell as U.S. and Kurdish forces entered Mosul in northern Iraqi after seizing Kirkuk, reducing the likelihood supplies will be disrupted from the region that produces 40 percent of the nation's oil revenue. Oil also fell after the International Energy Agency said global oil production last month rose to a record 80.3 million barrels a day, spurring concern that a glut is forming. Chakib Khelil, Algeria's oil minister, said there is a daily production surplus of 2 million barrels. ``The Kurds taking Kirkuk is having an influence, as well as signs of only minimal numbers of wells on fire,'' said David Thurtell, a commodities analyst at Commonwealth Bank of Australia. ``The market's looking to an oversupply in the very, very short term.''
Crude-oil for May delivery fell as much as 37 cents, or 1.4 percent, to $27.09 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Oil was at $27.17 a barrel, down 29 cents, at 10:39 a.m. Sydney time. Yesterday, in regular floor trading, oil fell $1.39, or 4.8 percent, to $27.46 a barrel, the biggest one-day decline since March 19 and the lowest closing price since March 21. Oil has plunged 31 percent from a 12-year high of $39.99 reached on Feb. 27.
Terms of Surrender
Mosul's governor and Iraqi military leaders in the city were working out the terms of surrender with U.S. troops, NBC reported, citing an unnamed U.S. military official. In radio and television broadcasts the U.S. has been urging Iraqi soldiers to surrender, ``and I am told that has happened in some portions,'' said U.S. Secretary of Defense Donald Rumsfeld. Kurdish fighters backed by U.S. forces captured Kirkuk earlier yesterday. U.S. commanders say they're preparing an advance on Tikrit, Saddam Hussein's ancestral home. ``It looks likely that the northern oil fields will soon be secure,'' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. ``It's one more threat that is rapidly disappearing.'' Members of the Organization of Petroleum Exporting Countries and other oil producers flooded the market with crude last month as the war with Iraq began, preventing shortages from occurring, the International Energy Agency said. The Paris-based energy agency, which represents the U.S. and 25 other industrialized nations, estimated second-quarter consumption at 76.4 million barrels a day, 2 million less than the first quarter. ``OPEC spare capacity is low, but that is partly offset by significant volumes of oil on the water plus a seasonal demand decline,'' the agency said in a monthly report. OPEC Plans Meeting
OPEC President Abdullah bin Hamad al-Attiyah is planning a meeting for April 24 with the rest of the group to consider cutting supplies. ``OPEC is worried, and with good reason,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``Production is up and it will be difficult to get the different nations to reduce output by enough to support prices.'' Oil companies in Nigeria are restoring production to normal levels after cutting the country's output by about one-third last month because of violence in oil regions. Royal Dutch/Shell Group, Nigeria's largest foreign oil producer, said yesterday it restored 100,000 barrels a day of output. Venezuelan production is returning to normal levels for the first time since a strike in December disrupted output, the state oil company Petroleos de Venezuela SA said this week. Iraq may be able to pump as much as 3 million barrels of oil a day by the end of this year, generating annual sales of $20 billion to help it rebuild, U.S. Vice President Dick Cheney said on Wednesday. The country averaged 2.48 million barrels a day in February, according to Bloomberg estimates. OPEC may need to reduce oil production by more than 2 million barrels a day, equal to some 7 percent of its output, to prevent a drop in prices as the threat to Iraqi oil fades, officials said. The group may reduce production by at least a million barrels a day from June, Commonwealth Bank's Thurtell said. Earlier this week, ``the Saudis told their Asian customers there would be no cut to their May allocations. That suggests any cuts that do take place will be effective perhaps 1 June,'' he said.//www.bloomberg.com