Growing fears of war push up crude futures

www.theage.com.au January 22 2003 By Angela Macdonald-Smith Singapore

Crude oil futures rose in New York after the United Kingdom ordered 26,000 troops to the Persian Gulf in preparation for a possible war and, along with the United States, dismissed new pledges by Iraq to cooperate with arms inspectors.

Oil contracts traded in London rose to near a two-year high after Iraq declared more illegal warheads and Britain said it would send more than 25 per cent of its army, tanks and attack helicopters to the Gulf.

"Sending a quarter of the British army is another clear signal" that the US and UK are preparing for war, said Simon Games-Thomas, an energy analyst in Sydney.

Crude oil for March delivery rose as much as 19 cents, or 0.6 per cent, to $US33.15 a barrel in after-hours electronic trading on the NY Mercantile Exchange.

On Friday, the February contract rose 25 US cents, or 0.7 per cent, to $US33.91 a barrel on the NYME, the highest closing price for a contract closest to delivery since November 29, 2000.    advertisement       advertisement

The exchange was closed yesterday for the Martin Luther King Day holiday.

The March Brent crude-oil futures contract gained 11 US cents to $US30.65 a barrel in London trading on Monday.

"The oil market is concerned that the weapons inspectors will make further discoveries in Iraq," said Steve Turner, an oil analyst at Commerzbank Securities. "That's supporting prices."

Iraqi officials and the United Nation's chief arms inspectors issued a statement on Monday saying Saddam Hussein's regime would search for chemical weapons similar to the 11 empty warheads found last week and answer questions raised by its weapons declaration, while foreign ministers of China, France and Germany said they wanted to give Iraq more time to comply.

Crude oil futures in New York rose more than $US11 a barrel in 2002, and have added almost $US2 this year on concern the US is preparing to attack Iraq, which the Bush administration accuses of developing chemical, nuclear and biological weapons. The US has said Iraq may need to be disarmed by force.

Oil prices also have risen as a strike in Venezuela enters its eighth week, disrupting oil shipments from the country.

Venezuela's oil output has tripled this month as more fields have been activated, but is about one-third of normal output.