Oil Rises on Renewed War Fears

reuters.com Tue February 18, 2003 09:17 AM ET By Tom Ashby

LONDON (Reuters) - Oil prices edged upwards on Tuesday to hover close to two-year highs as the United States and Britain moved toward a second U.N. resolution on Iraq that could lead the way to war on the world's eighth largest oil exporter.

Iraq urged fellow Arab countries to use their oil riches as a weapon to avert war, although such calls have fallen on deaf ears in the past.

International benchmark Brent crude oil rose 17 cents to $32.09 per barrel, within a dollar of its two-year high of $33.10 hit last week.

U.S. crude futures, which were closed on Monday for the Presidents' Day holiday, fell 40 cents to $36.40, catching up with Brent's slide on Monday.

"An attack at the end of February through to the middle of March still seems almost inevitable," said Lawrence Eagles of brokers GNI.

British Prime Minister Tony Blair said he still wanted a further United Nations resolution before any war on Iraq, but added that he had not reached the time to decide yet.

European Union leaders closed ranks 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.

Iraqi Foreign Minister Naji Sabri urged Arab nations to use their massive oil wealth as a weapon against war.

A similar plea fell on deaf ears last April, when Iraq urged an embargo to protest against Israeli violence against Palestinians.

The Arab-dominated Organization of the Petroleum Exporting Countries, whose members have hiked output to cover for shortages from strike-hit Venezuela, has vowed to do its best to cover any shortfall in Iraqi supply.

BAD WEATHER, STRIKES

Oil prices found some support from bad weather in northeast United States, the world's largest heating oil market, the 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.