Oil Rises on Cold, Move to UN War Mandate

reuters.com Tue February 18, 2003 11:11 AM ET By Tom Ashby

LONDON (Reuters) - Oil prices rose toward two-year highs on Tuesday as the United States and Britain pushed for a second U.N. resolution on Iraq that could open the way to war on the world's eighth largest oil exporter.

Biting cold weather in the northeastern United States drove strong buying in heating oil futures, which also pulled up the value of crude.

International benchmark Brent crude oil rose 38 cents to $32.30 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 12 cents to $36.68, catching up with Brent's slide on Monday.

"Heating oil is leading this market up, which is not surprising given the weather in the (U.S.) northeast," said Christopher Bellew of brokers Prudential-Bache International.

The White House said it could propose a new U.N. resolution calling for Iraq to disarm as soon as this week, much earlier than previously expected.

"It could take place as soon as this week. It could be next week. The timing will be determined as a result of the ongoing conversations within our government and with the allies," White House spokesman Ari Fleischer said.

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.

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

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.

OPEC will probably suspend oil output quotas temporarily and pump at will in the event of war cutting off Iraqi supplies, an OPEC source said on Monday.

BAD WEATHER, STRIKES

After a series of severe storms in the U.S. northeast already this winter, the world's largest heating oil market was again battered by Artic cold this week.

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.

The threats to supply and strong demand come at a time of record low inventories in the United States, drained by a prolonged strike in Venezuela.

Once the world's fifth largest exporter, Caracas is battling an opposition strike which has crippled the oil industry and slashed exports.

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.

Talks on ending the strike have been postponed by one day to Wednesday to ensure fuller attendance, officials said on Tuesday.