Crude Oil Futures Bullish But Volatile

www.heraldtribune.com The Associated Press

Crude oil futures ended a volatile trading session Tuesday on a somewhat bullish note, as concerns about a war with Iraq took center stage.

On the New York Mercantile Exchange, February crude ended up 12 cents at $32.37 a barrel after trading in a range of $31.90 a barrel to $32.90 a barrel.

Petroleum-product futures ended mixed.

February heating oil surged 0.78 cent to close at 89.16 cents a gallon. February gasoline dropped 0.74 cent to 89.16 cents a gallon.

On London's International Petroleum Exchange, February Brent ended up 41 cents at $30.61 a barrel. The contract climbed to a two-year high of $31.25 a barrel earlier in the session.

Natural gas for February delivery fell 14.4 cents to close at $5.107 per 1,000 cubic feet.

"The market's sloppy," said Tim Evans, an energy analyst at IFR Pegasus. "The volatility is still substantial. We had a range of more than $1 and given that we retraced the whole range you could argue that you were in a $2 range."

Crude oil prices rallied early in reaction to a report that U.N. weapons inspectors had found evidence of Iraqi weapons smuggling.

Chief inspector Hans Blix, in an interview with the BBC broadcast late Monday, said his team of inspectors in Iraq had found several instances of illegal Iraqi weapons smuggling.

But Blix said inspectors have yet to determine whether the items are related to Iraq's weapons of mass destruction.

The upward momentum stalled after a U.N. spokesman said Blix, in speaking to the BBC, was merely repeating remarks he made to the Security Council last week.

"Inspectors have confirmed the presence of a relatively large number of missile engines, some imported as late as 2002," Blix said last week.

The news came as the U.S. continues with a military buildup in the Persian Gulf region in preparation for a possible war with Iraq. President Bush repeated his warning to Saddam Hussein to give up his weapons of mass destruction. Bush said he is "sick and tired" of Iraqi maneuvers and warned "time is running out." Iraq has declared that it is free of weapons of mass destruction. Western officials question the assertion.

Concern about a war with Iraq along with a seven-week strike in Venezuela have lifted oil prices above $32 a barrel to their highest level in two years.

To cover a supply shortfall caused by the strike in Venezuela, the Organization of Petroleum Exporting Countries agreed Sunday to boost output by 1.5 million barrels a day to 24.5 million barrels a day beginning Feb. 1.

There was also concern that U.S. crude oil inventories will decline as a result of the Venezuela strike.

Weekly inventory data from the American Petroleum Institute and the Department of Energy, due out early Wednesday, are expected to show a decline of 2 million barrels in crude oil stocks, according to a Dow Jones Newswires survey of analysts.

Evans said the market is likely to remain on edge as long as concerns about Venezuela and Iraq persist.

"It's still a dangerous market," Evans said. "At some point the OPEC production increase is going to catch up with this market and if we have any kind of a backing-away of a war posture with Iraq and if we see any end to the Venezuela strike, then this quickly becomes a bear market."