UPDATE 1-Oil prices fall after Iraq war fears subside

Reuters, 02.18.03, 6:20 AM ET By Tom Ashby LONDON, Feb 18 (Reuters) - Oil prices fell further from two-year highs on Tuesday as a diplomatic battle between Europe and the United States over Iraq eased fears of a supply disruption from the world's eighth largest oil exporter. International benchmark Brent crude oil fell four cents to $31.88 per barrel, its second consecutive day of falls, having hit a two-year high of $33.10 last week. U.S. crude futures, which were closed on Monday for the Presidents' Day holiday, fell 74 cents to $36.06. "I don't think anyone is naive enough to think war clouds have gone away for good, but they are being held in check for a while at least," a London-based broker said. "An attack at the end of February through to the middle of March still seems almost inevitable," said Lawrence Eagles of brokers GNI. European Union leaders united on Monday to warn Iraq that United Nations arms inspections could not go on indefinitely without Baghdad's cooperation and declared for the first time that war could be the last resort. But the 15 leaders, bitterly divided over the Iraq crisis, failed to agree on how much time Baghdad should be given to rid itself of suspected weapons of mass destruction. The split prompted the United States and Britain to look at other ways to get the Security Council to support a new resolution on Iraq. But no draft is expected to emerge before Wednesday, with both nations waiting for the end of a public debate by countries without seats on the 15-member Security Council. That session, expected to turn into another forum against U.S. war plans, begins on Tuesday afternoon and will spill into Wednesday.

BAD WEATHER, STRIKES Oil prices took some support from bad weather in northeast United States, the country's largest consumer of heating oil, a two-month-old strike in Venezuela and a strike by Nigerian oil workers which began on Saturday. Heavy blizzards hit New England on Monday, closing most major airports between Washington and New York. The storm should boost heating oil use, but will also dampen gasoline demand as motorists stay at home. Venezuela, once the world's fifth largest exporter, is battling a prolonged opposition strike which has crippled the oil industry. Output there is still only half its normal three million barrels per day, while Nigerian oil workers threatened to cut off exports from Africa's top producer in a strike that began on Saturday. Blue-collar Nigerian oil workers joined a strike by white-collar workers on Tuesday, but oil companies managed to maintain exports using senior staff to replace strikers.