Crude Rallies on Iraq, Heating Oil Prices

www.quicken.com Monday, Febuary 24, 2003 04:11 PM ET   Dow Jones Newswires

NEW YORK -- Crude oil futures rallied again Monday, boosted by record heating oil prices and continued fears about war in Iraq.

Heating oil led the way. On the New York Mercantile Exchange, the front-month March heating oil contract climbed to a new record high of $1.1535 a gallon, surpassing the previous all-time high of $1.15, set in November 1979. The contract closed at $1.1467 a gallon.

The rally gave the rest of the petroleum complex a lift. Nearby April crude rose 90 cents to close at $36.48 a barrel. March gasoline settled at $1.0475 a gallon, up 3.47 cents on the day.

Across the Atlantic on London's International Petroleum Exchange, the gains were just as strong.

Nearby April North Sea Brent futures closed up 88 cents at $33.15 a barrel.

March gasoil futures jumped $12.25 to close at $315.25 a metric ton, a 27- month high.

"The crude oil market continues to trend higher, pulled along by a strong heating oil market and the continued drumbeat for war with Iraq," said Tim Evans, senior energy analyst at research firm IFR Pegasus in New York.

The heating oil surge mirrored a rally in natural gas futures, which climbed to 25-month highs on forecasts of cold weather and expectations of a sharp drawdown in storage.

"What's concerning the market today is that the weather is not giving us any signs of spring," said Phil Flynn, a trader and analyst at Alaron Trading Corp.

Although heating oil's climb to record territory was part of the reason for Monday's rally, the market's main focus remained Iraq, analysts said.

War jitters heightened after the U.S., the United Kingdom and Spain introduced a United Nations Security Council resolution Monday that finds Iraq in breach of its disarmament obligations and warns the rogue nation of "serious consequences."

The resolution says that Iraq has failed to "take the final opportunity" afforded it to disarm.

"People view that as another step toward war," said Tom Bentz, an analyst at BNP Paribas Futures.

Traders worry that an attack will result in a disruption of Iraqi oil exports and cause a supply disruption in the Middle East, the world's principal source of oil.

Western officials say they expect a vote on the resolution within the next two weeks.

But approval is far from guaranteed. Earlier Monday, key U.N. Security Council members France, Germany and Russia submitted an alternative proposal for step-by-step disarmament of Iraq

Despite the opposition, however, the U.S. has said it is prepared to lead an attack on Iraq without a new resolution.

With the market's focus on Iraq, traders shrugged off news of continued increases in Venezuelan oil output.

On Sunday, state oil company President Ali Rodriguez said Venezuelan crude oil output, crippled by a strike in December and January, has risen to more than two million barrels a day.

Before the strike, Venezuela exported about 3.1 million barrels a day of crude oil.

With output on the rise, state monopoly Petroleos de Venezuela SA, known as PdVSA, will partially lift a force majeure on exports, a company source said.