Oil Higher as U.S. Presses Iraq

abcnews.go.com — By Richard Mably

LONDON (Reuters) - Oil prices ticked higher on Monday as top U.N. weapons inspectors spent a second day in Iraq and the United States said time was running out for Baghdad to prove compliance with disarmament resolutions.

London Brent blend in early trade added 19 cents to $30.73 a barrel. U.S. crude, closed on Monday for Martin Luther King day, set a new two-year high of $34 a barrel on Friday.

Washington on Sunday issued one of its clearest warnings yet to Iraqi President Saddam Hussein that non-cooperation with U.N. inspectors could be deemed a trigger for a war in the absence of a "smoking gun," or hard evidence of weapons of mass destruction -- and that a decision could be just weeks away.

"The test is, is Saddam Hussein cooperating?" said Defense Secretary Donald Rumsfeld on weekend television. "He's not doing that."

Rumsfeld, presiding over a huge U.S. military build-up of warplanes, ships and tens of thousands of troops in the oil-rich Gulf region, said a final conclusion on Iraqi cooperation could be made "in a matter of weeks, not in months or years."

"Of course Rumsfeld is a hawk, but if the test of compliance is cooperation then clearly Saddam is not cooperating," said oil broker Nauman Barakat of Fimat International Banque.

Chief U.N. weapons inspector Hans Blix and Mohammad ElBaradei, head of the U.N. nuclear watchdog, say there are big gaps in Baghdad's arms declarations, and are demanding quick answers before they report to the Security Council on January 27 on Iraqi compliance.

"I think (the Iraqis) have said that there are still certain areas they are ready to provide more information. I think that in other areas they said they are ready to reconsider their position," ElBaradei said in an interview with Reuters.

"What we tried to do today at this meeting is to impress on the Iraqi authorities that the time is running out."

U.S. national security adviser Condoleezza Rice, on U.S. weekend television, said: "Clearly the 27th is an important date ... (It) probably marks the start of a last phase of determining whether the Iraqis have fully complied."

EXILE

From Beirut, a special envoy of Saddam's dismissed talk of the Iraqi president going into exile.

"As we have said before, we reiterate now that this is merely nonsense and one of the tactics of psychological warfare," said Ali Hassan al-Majeed, a member of the Revolutionary Command Council and a cousin of Saddam.

Rumsfeld said he hoped Saddam would choose exile, but he was unsure of the prospect. "There is at least a possibility," he said. "His neighboring states are in a process now of trying to avoid a conflict there by having him leave the country."

Saddam remained defiant.

"After putting our faith in God, victory is absolutely assured. We don't see it on the horizon, rather it is in our grasp and inside our chests," he told a group of army officers.

Oil traders said Venezuela's general strike, now in its seventh week, also was keeping the heat under crude prices.

Venezuelan President Hugo Chavez said on Sunday he was "winning the oil war," restoring crude flows and restarting ports and refineries. He said oil output which fell to 500,000 barrels per day this month was now at 1.2 million bpd, versus three million bpd normally.

Striking oil workers said that production was only half the volume given by Chavez.

Leading OPEC producer Saudi Arabia is moving to fill the gap by raising output by between 500,000 and one million barrels a day, industry sources said.

Riyadh is opening up the taps and by February could be pumping nine million bpd, the industry sources said on Sunday from eight million recently.

"The Saudis are cranking it up. The message is that there is a big increase on the way," said one senior Western oil executive.