NYMEX oil to rise on Blix Iraq smuggling remarks

www.forbes.com Reuters, 01.14.03, 9:35 AM ET

NEW YORK, Jan 14 (Reuters) - NYMEX crude oil futures were expected to push higher at the open Tuesday after the chief U.N. weapons inspector Hans Blix said his teams had found evidence of Iraqi smuggling in violation of U.N. resolutions.

"The comments by Blix came in after there was some softening because of Mexico and OPEC's production increases," said a London-based oil trader.

NYMEX February crude was called 50 cents to 60 cents higher after ending overnight ACCESS trading 56 cents to the upside at $32.82 a barrel, trading $31.88 to $32.85.

In London at 9:30 a.m. EST (1430 GMT), the February Brent crude contract was 66 cents higher at $30.86 per barrel.

Blix, in a BBC interview broadcast late Monday, said his teams in Iraq have uncovered weapons-related smuggling but it was unclear if the goods were linked to weapons of mass destruction. "There has been a considerable amount of import in the weapons sector which clearly is smuggling, and in violation, and they are in fact large quantities," Blix said.

Adding fuel to the bullish sentiment were remarks from Britain's Foreign Secretary Jack Straw on Tuesday stating that war on Iraq might not need a new U.N. resolution.

Meanwhile Baghdad said it had already come clean about arms programs and that its president would fight to the bitter end.

NYMEX oil prices had dipped in electronic trading when Sunday's OPEC decision to raise crude output by 1.5 million barrels per day (bpd) to compensate for losses from the Venezuelan strike was followed by a Mexico promise to increase crude exports by 120,000 bpd to 1.88 million bpd.

With the Venezuela general strike in its 44th day, oil traders will decide the likelihood that mediation by the United Nations and the United States might help to break the deadlock between Venezuelan President Hugo Chavez and opposition leaders. Chavez will hold talks with U.N. Secretary General Kofi Annan on Thursday.

Frigid temperatures in the U.S. northeast, with the six- to 10-day forecast calling for below normal readings, should continue to support heating oil futures.

The next round of U.S. oil inventory data, due out Wednesday morning, will provide a fresh snapshot of the Venezuela strike's effect on U.S. oil supplies, already hovering at historic lows.

NYMEX February heating oil is expected to open 1.25 cents to 1.50 cents higher after ending ACCESS trade up 1.61 cents at 89.99 cents a gallon, the overnight high.

NYMEX February gasoline is expected to open 1.00 cent to 1.25 cents higher after ending ACCESS trade up 1.20 cents at 91.10 cents a gallon, also the overnight high.