Oil up, as Bush beats war drums

afr.com Jan 16 09:38 AFP

Oil prices gushed higher overnight as US petroleum stocks shrank and fears mounted about the impact of a possible war in Iraq and the general strike in Venezuela.

"People are still taking in what's going on with Iraq and Venezuela," said Mike Fitzpatrick, market analyst at Fimat.

Prices had been supported by news that US commercial crude stocks had dropped last week, he said.

New York's reference light sweet crude February-dated futures surged US84¢ to $US33.21 a barrel.

In London, the price of benchmark Brent North Sea crude oil for February delivery leapt US61¢ to $US31.22 a barrel.

Commentators said concern over mounting tensions between the United States and Iraq, coupled with worries over Venezuelan supply disruptions, continued to drive prices.

"It's still the same issues - the Venezuelan strike and the impending threat of war against Iraq - which the market is really focusing on," said Prudential Bache oil broker Tony Machacek in London.

US President George Bush expressed mounting impatience with Baghdad on Tuesday, warning that "time is running out" for Iraqi leader Saddam Hussein to avert war by heeding a UN disarmament ultimatum. advertisement advertisement

GNI analyst Lawrence Eagles, also in London, said that although Mr Bush said little that was new, his comments had nonetheless served to "underscore the US message and the potential for unilateral action despite European pressure for diplomacy".

In a separate development, the United States earlier on Wednesday formally asked the North Atlantic Treaty Organisation for support in the event of a war against Iraq.

Supply disruptions, stemming from the ongoing general strike in Venezuela, have hit US stock levels in recent weeks, although not as badly as many had feared.

US commercial crude oil stocks - excluding the emergency reserve - fell last week as the Venezuelan strike pressured supplies.

The Energy Department said US commercial crude oil inventories dropped by 6.4 million barrels to 272.3 million barrels in the week to January 10 when compared with the previous week.

Crude oil imports rose 200,000 barrels a day from the previous week to an average 8.5 million barrels a day last week, it said.

Daily imports averaged 8.4 million barrels over the past four weeks, down about 400,000 barrels from the same period a year earlier.

"It appears that while crude oil imports from Venezuela continue to be much lower than normal, they have increased some over the last two weeks," the department said.