Oil prices, which stayed in a narrow range this week, are expected to remain steady as traders stop to celebrate the holidays before returning their attention to Middle East developments, analysts said.
"Next week may be the calm before the storm," said Nauman Barakat, an analyst with Merrill Lynch in New York. "After we come back from the holiday, I think the fun will really begin."February crude oil contracts, which assumed spot month status Tuesday, lost 63 cents on the week, with the bulk of that coming Friday, when they fell 47 cents on the New York Mercantile Exchange to $25.92 a barrel. January expired Tuesday at $27.86.
Analysts polled by Reuters said crude oil will average between $25 and $28 a barrel in the shortened week ahead. The NYMEX will be closed Monday and Tuesday.
Prices should edge higher as the U.N.-imposed Jan. 15 deadline for Iraq to pull out of Kuwait approaches, they said.
Traders said oil markets were buffeted Friday by a series of reports on the chances of war in the oil-rich Persian Gulf region.
Prices slumped at midday after an Algerian official said Iraq was willing to make concessions on Kuwait to avert war.
"Iraq certainly seeks a peaceful solution and is willing to pay the price for it but it will not accept any settlement that sullies its honor," Algerian Foreign Minister Sid Ahmed Ghozali said.
The market rebounded after Defense Secretary Dick Cheney told American troops that war was looking more likely, and Saddam Hussein said in an interview on German television that Iraq will not pull out of Kuwait by Jan. 15.
Then, in the final 15 minutes of trading, oil tumbled when a spate of late selling assumed greater significance due to thin trading volume.
Analysts said the mixed signals over the gulf situation made it difficult to predict where oil markets would tread next. Some said Saddam could still shock oil markets by pulling out of parts of Kuwait in exchange for keeping two key islands and the disputed Rumalia oil field.
Saddam also may opt for a partial pullout from Kuwait to swing public opinion away from war, they said.