Oil prices streak higher

townsvillebulletin.news.com.au 25feb03

WORLD oil prices have raced higher as the United States and its allies submitted a draft UN resolution pushing for military action to disarm Iraq. Icy temperatures in the United States and low world fuel supplies also pushed prices higher.

"There is a confluence of a lot of events that don't point to lower prices," Mike Fitzpatrick, market analyst at the Fimat brokerage house, said.

"There is the urgency of the war, the cold persists and the world inventories are still low."

New York's benchmark light sweet crude for April delivery shot up US90c to $US36.48 a barrel.

In London, the price of benchmark Brent North Sea crude oil for April delivery surged US91c to $US33.18.

Oil prices rose as US moves to disarm Iraq by force entered the final phase.

The United States, Britain and Spain submitted a draft resolution stating Iraq had failed to rid itself of weapons of mass destruction and calling on the United Nations Security Council to take action.

The US-British draft said Iraq had not co-operated fully with disarmament inspections as required under UN resolution 1441, passed on November 8.

The resolution, which will face stiff French-led opposition in the council, says the council "decides that Iraq has failed to take the final opportunity afforded to it in resolution 1441".

President George W Bush pressed for action.

"Is it going to be a body that means what it says? We certainly hope it does," Bush said.

"But one way or the other, Saddam Hussein, for the sake of peace, and for the security of the American people, will be disarmed," he said.

France put a counter-proposal to the Security Council today calling for strengthened inspections of Iraq's arsenal. Russia and Germany were co-signers of the memorandum, which does not need a vote, while China backed the proposal.

Cold weather in the United States further supported oil prices.

"Apart from the continued Iraqi uncertainty, a lot of bad weather is expected again in the States, meaning more demand, which has pushed product and crude oil prices up," said Ed and F Man trader Graham Flint in London.

Traders said a strike in Venezuela's oil industry was still propping up prices, although export shipments recovered partially.

The head of Venezuela's state-run oil company PDVSA, Ali Rodriguez, said Venezuela was now producing 2.06 million barrels of oil a day, which it hoped to boost to 2.5 million this week.

GNI-Man Financial analyst Lawrence Eagles said the Venezuelan opposition had on Friday estimated Venezuelan output at 1.515 million barrels per day.

"Whatever the actual level of output, it is clear that output and shipments are increasing, and this should ease the pressure on the world market if there is a war with Iraq," he said in London.

The slew of political and market concerns outweighed a statement from Iran that the Organisation of Petroleum Exporting Countries (OPEC) should avoid cutting production at its next meeting on March 11.

Asked about the possibility of an output cut from the present level of 24.5 million barrels a day, Iranian Oil Minister Bijan Namdar Zangeneh said: "I don't think so. The current situation in the region is abnormal both from a political and military point of view."