War preparations bump up oil futures

www.chron.com March 4, 2003, 10:59PM

NEW YORK -- Crude oil futures rallied Tuesday, staging a sharp recovery after three straight sessions where prices declined on hopes that a war with Iraq could be averted.

Between Thursday and Monday, prices fell sharply as Iraq's increased cooperation with U.N. weapons inspectors and Turkey's rejection of access to U.S. troops sparked speculation that a U.S.-led attack on Iraq could be avoided, or at least delayed by several weeks.

But prices turned around Tuesday as the United States stepped up military preparations for a war and indicated it would seek U.N. Security Council approval of a resolution on military action next week, analysts said.

At the New York Mercantile Exchange, light, sweet crude for April delivery rose $1.01 to end at $36.89.

April heating oil futures ended up 1.26 cents at $1.0486 a gallon, while April gasoline futures climbed 1.74 cents to settle at $1.1122 a gallon.

Natural-gas futures fell for the second day in a row as above-normal temperatures in the Midwest and East were forecast to pare heating use. Gas for April delivery retreated 12.1 cents to settle at $7.041 per thousand cubic feet.

At London's International Petroleum Exchange, April Brent futures rose 61 cents to close at $33.09 a barrel.

Exxon Mobil Chairman Lee Raymond said Tuesday the Bush administration could release emergency crude reserves if there is war with Iraq, depending on the extent of disruption to oil supply.

"It's clear if there's going to be a war, then Iraq is going to stop exporting," Raymond told analysts in New York.

"The U.S. government could release some oil from the SPR," he added, referring to the strategic petroleum reserve, "I wouldn't want to suggest to you that there will be clarity on this at all. There are a lot of what ifs' and whens.' "

Energy traders worry that an attack on Iraq could disrupt the flow of oil from the Persian Gulf.

Meanwhile, OPEC and non-OPEC oil ministers will meet next week to discuss what they could do in the event of a war in Iraq, an official from the Organization of Petroleum Exporting Countries said.

OPEC countries have increased production in recent months in response to a strike in Venezuela and soaring oil prices.

According to a Dow Jones Newswires survey, OPEC crude output jumped by 1.43 million barrels a day to 27.091 million barrels a day in February from January.