Brussels remains concerned about oil prices

afr.com Feb 5 07:42 AFP

The recent surge in world oil prices amid war jitters over Iraq remain a source of concern as to their impact on economic growth, the European Commission said on Tuesday.

But a strengthening of the euro is offsetting the impact of the crude price increase, which is also being tempered by a resumption of production by Venezuela, said the EU executive.

Oil price rises "remain a concern" but are "compensated for, to a certain extent, by the increase" in the value of Europe's single currency, said a spokesman for Monetary Affairs Commissioner Pedro Solbes.

The latest commission forecasts, which predicted an average of 1.8 per cent growth in the 12 member eurozone, were based on the assumption of an average crude price of $24 a barrel.

If crude prices were to rise by $10, to an average of $34, growth would be reduced by 0.2 percentage points this year and by the same amount next year, said the spokesman.

Around midday on Tuesday a barrel of reference Brent crude for March delivery stood at $30.20, amid continuing tension ahead of a presentation by US Secretary of State Colin Powell to the UN on Wednesday of new evidence concerning alleged Iraqi weapons of mass destruction.

The euro has surged against the dollar in recent months, with dealers selling off the greenback as sabre rattling by Washington appeared to bring the prospect of a Gulf conflict closer.