Adamant: Hardest metal
Tuesday, January 28, 2003

Oil prices moving higher
Monday, January 27, 2003 Posted: 2:49 PM HKT (0649 GMT)

Blix is due to brief the U.N. Security Council Monday

SINGAPORE (Reuters) -- Oil prices stayed on an upward track on Monday, awaiting a key report from U.N. weapons inspectors for a signal of the likelihood of war in Iraq.

U.S. light crude rose 21 cents to $33.49 a barrel, extending Friday's gains of more than $1 in New York.

Brokers said oil markets were likely to be volatile with several potential price-moving events in the next five days.

Just hours before chief weapons inspector Hans Blix was due to brief the U.N. Security Council, Washington made it clear it was ready to attack Iraq alone if needed, while Britain said Baghdad was hiding banned weapons, spying on arms inspectors and hindering their movements.

Blix, in charge of chemical, biological and ballistic weapons teams, and Mohamed ElBaradei, in charge of nuclear arms teams, will submit on Monday their first full report to the U.N. Security Council on Baghdad's 12,000-page weapons declaration and Iraq's cooperation with arms inspectors.

Bush, Blair to meet

U.S. President George W. Bush will to make a State of Union address on Tuesday and is due to meet key ally Britain's Prime Minister Tony Blair later this week. Britain has sent thousands of troops to join a U.S. military build-up in the Gulf.

"Each of these stages will provide further clarity and we can expect a timetable to war to become a little clearer," said Sydney-based independent oil analyst Simon Games-Thomas.

"It's a busy week and all it will take is a couple of words of moderation and we could see prices really come off, it's that volatile," said Games-Thomas.

U.S. secretary of State Colin Powell said at the weekend that time was running out for Baghdad to disarm voluntarily.

"We will not shrink from war if that is the only way to rid Iraq of its weapons of mass destruction," Powell said at the World Economic Forum in Davos, Switzerland.

The world's biggest oil producer, Saudi Arabia, signalled at the weekend that it was not planning to raise supplies any further despite fears that war in the oil-rich Middle East could lead to a supply crunch and a spike in crude prices.

Near two-year high

Benchmark oil prices are running close to two-year highs on concerns that an attack on Iraq might coincide with the ongoing strike in Venezuela, which has strangled oil exports from the world's fifth-biggest exporter.

"There is no shortage in the market and there should be no reason for prices where they are today," Saudi Oil Minister Ali al-Naimi told a panel at the WEF.

The Organisation of the Petroleum Exporting Countries agreed in December to raise output by 1.5 million barrels per day to counter some of the shortfall due to the opposition-led strike in Venezuela.

"What can we do more? I do not agree there is a lack of oil," OPEC Secretary-General Alvaro Silva also said at the forum. "The problem of the price is the threat of war."

Venezuela's President Hugo Chavez hinted at the weekend that he may be forced to take up arms if he were defeated by the opposition movement, which is calling for Chavez to step down.

Venezuelan crude output has recovered from lows in December when it was running at a trickle of about 150,000 bpd against more than three million bpd before the strike, which started on December 2.

Strikers said on Sunday that crude output was about 986,000 bpd, 30 percent of pre-strike levels, while Chavez claimed production had reached 1.32 million bpd.

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