Brent crude oil firms on fund-buying ahead of UN inspectors' report Monday
LONDON (AFX) - Oil prices firmed in late afternoon trade on US fund buying, ahead of a report Monday by weapons inspectors to the UN Security Council, dealers said.
At 5.07 pm, March-dated Brent crude futures traded up 38 cents on the day to reach 30.10 usd a barrel, compared with 29.78 usd in late morning trade.
In New York, the reference light sweet crude March contract gained 46 cents a barrel to reach 32.71 usd.
"There is some fund buying coming in from the US side, with people adding to long positions, which explains the recent strength this afternoon," said trader Mark Keenan at ABN Amro.
He said investors were also squaring positions to limit exposure to risk over the weekend, both from the negative effects of headlines from Venezuela and any gains relating to a possible war with Iraq.
The chief UN weapons inspectors are due Monday to give a key report to the UN Security Council.
Diplomats believe the US, which with the UK is massing tens of thousands of troops in the Persian Gulf region, might use a negative report as a reason to launch military action against Iraq.
However, France and Germany issued a joint declaration yesterday in which both countries restated their opposition to any unilateral decision by the US to go to war.
Analysts say unilateral action by the US poses a greater threat to global oil supplies than action by an international coalition, citing the risk of a backlash and political instability in other Arab oil producers, notably Saudi Arabia.
OPEC secretary general Alvaro Silva-Calderon said the world is not on the verge of an oil crisis yet, but the cartel can do little if the US launches military strikes on Iraq.
"We are in a transitory situation and not on the edge of an oil crisis," he said, at the World Economic Forum in Davos.
When asked what would happen to global oil prices in the case of a military conflict, he added: "We don't know. It's out of our control."
Recent reports said OPEC output is currently at capacity, leaving little room for increases if a shortage looms.
Keenan said prices had retraced lower this week on signs that the eight-week long strike in Venezuela was beginning to collapse.
Venezuela's opposition showed support for a proposal to be taken up by international mediators in Washington today, saying a 54-day-old strike would be called off if agreement on early elections is reached.
However, Kevin Norrish at Barclays Capital said the country's exports remain severely curtailed, despite an admission by oil workers that output had recently increased to around 715,000 bpd.
Pre-strike output stood at just under 3.0 mln bpd according to industry estimates.