LOS ANGELES, March 25 (UPI) -- Crude prices fell 69 cents on the New York Mercantile Exchange Tuesday when reports of a civilian uprising against Saddam Hussein's security forces in the oil city of Basra was taken as a sign that the war in Iraq could be back on course toward a prompt conclusion.
Although largely unconfirmed, British reports of fighting between civilians and loyalist security forces inside the city gave new hope to the idea that the city would soon fall, clearing the way for the decisive battle in Baghdad and the resumption of oil production in the southern oilfields already under allied control.
"We're beginning to see trenches filled with oil being ignited in the city of Baghdad," Gen. Gene Renaurt, operations chief with the U.S. Central Command in Qatar told reporters Tuesday. "We're not certain what the purpose would be.... Unfortunately, this shows that the regime is very willing to destroy Iraq's resources to protect itself."
Some analysts have been warning that Saddam Hussein was likely to concede control of the southern oilfield to the British and to the Americans and to then fight it out in Baghdad, however the oil markets have recently been sending prices up or down depending on how the winds of war are blowing on a given day.
Tuesday was dominated by the bears that pulled May NYMEX crude down to $27.97, erasing a chunk of the previous day's $1.75 per barrel gain.
Market reports indicated that much of the selling was in the form of speculative long positions rather than a more broad fear of a new supply disruption.
Gasoline and heating oil also declined. Traders will get a better idea of the U.S. supply picture on Wednesday when the U.S. Energy Information Administration and the American Petroleum Institute release their closely watch weekly inventory reports.
The supply situation will depend to a large extent on Iraq and on developments in Nigeria where, according to the EIA, ethnic violence in the Niger Delta had trimmed Nigeria's crude output by some 900,000 barrels per day.
On Tuesday, British intelligence officials told reporters in the desert that they had detected signs of what appeared to be an uprising by some of Basra's 1.5 million residents against the government forces holding the city. The British Broadcasting Corp. reported that while the uprising could not be confirmed, military intelligence reported that Iraqi troops appeared to be firing mortars at targets inside the city limits.
Basra is the largest city in southern Iraq and is a key infrastructure point for the southern oilfields that fell to the Americans and British largely intact.
Some analysts opined Tuesday that taking Basra would not necessarily bring the war to a close any sooner since Basra has historically been unfriendly to Saddam. At the same time, eliminating the pro-Saddam forces inside the city would free the allies up to focus more on Baghdad.
"They're keeping control over the population and preventing the population from throwing off the shackles of Saddam's regime," noted Kenneth Pollack, an analyst with the Brookings Institution in Washington. "They are also harassing and tying down coalition troops, which I think is about all he (Saddam) ever expected to have happen in the periphery."
The allies already control the deep-water port of Umm Qasr and its offshore tanker terminals, however commanders said the waters in the area were still being checked for mines and that there were new signs Iraq might be attempting to lay mines in open waters transited by allied warships and oil tankers.
Renaurt said allied ships "continue to counter ongoing regime efforts to mine the North Arabian Gulf waters clandestinely."
"I would highlight that yesterday an Iraqi dhow -- a civilian vessel -- was intercepted in the North Arabian Gulf," Renaurt said, referring to the other more familiar name usually given to the Persian Gulf. "Upon closer inspection, it was found to be a mine layer with mines on board. It was subsequently destroyed."
There was no indication that the Iraqis had targeted the vital tanker lifeline, although shipping companies operating in the Gulf are already faced with heavy insurance premiums that could become even pricier should mines become a definite threat.
