Oil price up on Iraq's warning

www.news24.com 28/01/2003 14:13  - (SA)  

London - Oil prices climbed on Tuesday on rising worries about the threat to Middle East supplies of a war in Iraq after Baghdad said it had not ruled out an attack against its oil-rich neighbour Kuwait.

Traders were also nervous ahead of a major speech by US President George W Bush in which he was expected to brace Americans for possible war with Iraq, despite signs of opposition from fellow members of the UN Security Council.

The price of benchmark Brent North Sea crude oil for March firmed US28c to R30.14 per barrel in early deals.

"Prices have rallied overnight following comments by Iraqi officials that they might attack Kuwait," said Lawrence Eagles, analyst at brokers GNI-Man Financial.

Iraqi Deputy Prime Minister Tareq Aziz said Kuwait "is a battlefield and American troops are in Kuwait and preparing themselves to attack Iraq".

"If there will be an attack from Kuwait, I cannot say that we will not retaliate. We will of course retaliate against the American troops wherever they start their aggression on Iraq," he told Canada's CBC television.

In New York, the light sweet crude March contract slumped 99c per barrel to $32.39 on Monday after a report by UN chief weapons inspector Hans Blix on Iraq fed hopes that war might be further away than had been feared.

Eagles said Blix had given a "slightly more negative-than-expected assessment of Iraq's co-operation", but added that traders were more concerned about clues on the time-scale for war.

"The key issue for the market is that the weapons inspectors will be given a few more weeks at least to carry out their tasks," he wrote in a note to clients.

Analysts say the threat of disruption to Iraqi oil comes as the market is already tight because of a strike in Venezuela that has severely disrupted the country's oil exports, though there have been recent signs of cracks in the walk-out.

If the market loses Iraq's oil output of about two million barrels per day while Venezuela's exports are crimped, analysts say the Opec oil cartel would struggle to make up the shortfall.

Members of the Organisation of Petroleum Exporting Countries agreed earlier this month to raise output by 1.5 million barrels per day from the start of February, but the move has so far failed to rein in prices significantly.

The United States has huge strategic petroleum reserves of about 600 million barrels, but has been reluctant to tap any of the crude despite calls from US oil majors for their release. - Sapa-AFP