NYMEX crude up sharply, US keeps pressure on Iraq

www.forbes.com Reuters, 01.24.03, 1:36 PM ET

NEW YORK, Jan 24 (Reuters) - NYMEX crude futures soared above $33 a barrel on Friday as the United States pressed Iraq to allow U.N. arms inspectors to interview Iraqi scientists privately to credibly determine whether Iraq is keeping banned weapons.

Venezuelans now on a 54-day-old strike to force President Hugo Chavez to step down said they will not back down until early elections are called, adding fuel to the day's rally.

At 13:20 p.m. EST (1820 GMT), NYMEX March crude was up 91 cents at $33.16 a barrel, after surging to $33.24. It hit a session low of $32.11 in early trade.

"We are seeing supply concerns front and center again ... at the bottom of the Iraq and Venezuela situation is the fear of supply disruptions," said a NYMEX floor trader.

In London, Brent March crude was up 66 cents at $30.38 a barrel, after extending session highs to $30.49.

Traders are awaiting Monday's report from U.N. weapons inspectors on and U.S. President George W. Bush's State of the Union address on Tuesday for further price direction.

The United States continued to make its case for war on Friday, saying it had evidence Iraq has maintained a program to produce weapons that have been banned since the 1991 Gulf War.

The White House said Iraq's refusal to allow scientists to be interviewed without minders was "unacceptable." Such interviews should be allowed without delay, it said.

Opposition to the U.S. stand has mounted, with China and Russia joining France, Germany and Canada on Thursday in urging that U.N. weapons inspectors be given more time in Iraq.

Two U.S. Navy vessels including a hospital ship sailed along the Suez Canal on Friday, heading for the Red Sea and on to the Gulf amid a military build-up for a potential war against Iraq, shipping sources said.

And a British ship carrying arms and ammunition should arrive at the Mediterranean city of Port Said at the entrance of the Suez Canal on Saturday, also headed for the Gulf, the sources added. News that Iraq would "cause damage or destruction" to its own oil fields if war broke out, according to a senior U.S. defense official, also supported prices.

But the official also said the U.S. has plans to secure and protect the fields in the event of hostilities, somewhat calming nervous traders.

NYMEX crude hit a 26-month high of $35.20 on Tuesday on fears of a U.S.-led war on Iraq.

Some of the early weakness was prompted by news that Venezuelan oil exports jumped 62 percent in the week to Friday to 688,000 barrels per day (bpd), or 25 percent of capacity.

Venezuela, a major oil supplier to the United States, exported 2.7 million bpd before the strike. Striking oil workers said on Thursday that Venezuela's production had risen to 812,000 bpd or 25 percent of capacity.

On Friday, those workers said they would press on until the government agreed to early elections and a deal to return them to their jobs.

Amid a cold snap in the U.S. Northeast, NYMEX February heating oil was up 1.87 cents at 93.40 cents a gallon.

Gasoline futures were up as European oil traders shipped gasoline to Venezuela to make up for scarce fuel supplies caused by the eight-week general strike.

NYMEX February gasoline was up 2.29 cents at 92.10 cents a gallon, moving within a 89.90-92.20 cent range.