Oil Slips as Allies Prepare UN Mandate

abcnews.go.com — By Tom Ashby

LONDON (Reuters) - Oil prices pulled back from 29-month highs Wednesday in light profit-taking as the United States and Britain worked on a U.N. mandate for war on Iraq.

A cold blast in the world's biggest heating oil market in the U.S. Northeast also underpinned prices, which are just $4.50 shy of an all-time high set after Iraq invaded Kuwait in 1990.

International benchmark Brent crude oil fell 29 cents to $32.25 per barrel, just below a two-year high of $33.10 touched last week.

U.S. crude futures dipped 33 cents to $36.63 a barrel, off a peak of $37.05 reached Tuesday, its highest level since September 2000.

Dealers reported light profit-taking after a blistering oil price rally over the last three months which has added 50 percent to the cost of crude.

"The world is facing the prospect of losing Iraq's two million barrels per day of oil exports, and perhaps some of Kuwait's oil too, at a time when oil prices are already well above $30 per barrel and stocks are abnormally low," said the Center for Global Energy Studies in a monthly report.

President Bush shrugged off global anti-war demonstrations Tuesday, while Washington and London worked on a second United Nations resolution to sanction war if Iraq fails to disarm immediately.

The United States warned its reluctant ally Turkey that time was running out to agree on the deployment on its soil of an Iraq invasion force of U.S. troops as the two states wrangled over the size of a multi-billion-dollar aid package.

The Defense Department ordered another 28,000 troops to the Gulf region this week as it builds a force of more than 200,000 for a possible invasion of the Arab oil power.

Iraq is the world's eighth biggest oil exporter, selling roughly two million barrels per day (bpd) into the international market, and traders fear war could disrupt supplies from other producers in the Middle East, which supply 40 percent of world exports.

The White House has said a new proposal could be proposed this week to the U.N. Security Council, where Bush has met opposition from France, Russia and China, who want more time for weapons inspections to continue.

TIGHT SUPPLIES AS NIGERIA DOWNS TOOLS

Concerns over supply disruptions resulting from a war come at a time when strike-hit Venezuelan exports struggle to return to normal and oil workers in Nigeria downed tools, although supplies from Africa's top producer have remained normal so far.

Venezuela's oil exports were running at about 1.3 million bpd Tuesday, roughly 50 percent of normal levels, despite government efforts to restore production.

Venezuela accounted for 13 percent of U.S. oil imports before the strike, aimed at toppling President Hugo Chavez, and the stoppage has severely dented U.S. fuel stocks, which are running at historic lows.

Analysts expect another decline across the board in U.S. oil supplies as Arctic temperatures battered the Northeast region stepping up demand for winter heating fuel.

U.S. stocks of crude oil are already below 270 million barrels, seen as the minimum level required to keep the nation's refineries running normally.

Supplies could be tightened further if there is an escalation in a strike over pay and conditions by Nigerian oil workers, which began Saturday but has not touched exports so far.

Nigeria pumps just over two million bpd and is the world's seventh biggest exporter.

Union and government officials are due to meet Wednesday to try and resolve the dispute.