Oil climbs on Iraq tensions

www.dailytelegraph.news.com.au From correspondents in New York 07mar03

OIL prices swung to as war fears escalated ahead of a news conference by President George W. Bush and on the eve of a UN weapons inspectors' report.

"People are concerned about the Bush press conference, it might signal that war is a close," said Refco market analyst Marshall Steeves.

New York's benchmark light sweet crude for April delivery rose 31 cents to $US37 a barrel.

In London, the price of benchmark Brent North Sea crude oil for April delivery advanced 51 cents a barrel to $US33.51.

Traders viewed last week's $US39.99-a-barrel peak on the New York contract as a new ceiling, said Fimat analyst Mike Fitzpatrick.

They "can use the recent high as some kind of psychological resistance until situation with Iraq is clarified," Fitzpatrick said.

President Bush said the UN Security Council was in the final stages of deciding whether to back a war against Iraq and accused Saddam Hussein of making a "willful charade" of disarmament.

"We are days away from resolving this issue at the Security Council," Bush told a press conference at the White House, adding that he would press for a vote soon on a new resolution on Iraq.

It was "the final stages of diplomacy," he declared, highlighting how more than 200,000 US troops are now in place around Iraq ready for a war.

But with many observers saying that the US appeared determined to start a war, Bush said that "diplomacy has not worked, we have tried diplomacy for 12 years."

Traders were waiting nervously for a report on Friday from chief UN arms inspector Hans Blix to the Council, and, perhaps more importantly, the reaction of council members to his findings.

Mr Bush said the US will call for a vote on a new resolution submitted by the US, Britain and Spain whatever the level of support in the Security Council. France, Russia and China, which are also permanent members of the Council, are leading a coalition against the resolution.

"Yes, we will call for a vote, no matter what the whip count is," Mr Bush told the news conference.

"We are calling for the vote, we want to see people stand up and say what their opinion is about Saddam Hussein and the utility of the United Nations Security Council."

Barclays Capital analyst Orrin Middleton in London said prices would be supported at "these high levels" so long as uncertainty over the Iraq crisis persisted.

"The general trend is still 'to buy on dips'," Middleton said.

The low level of US oil stocks also buttressed prices, he said.

A cold snap in the United States and a strike in Venezuela that crippled the South American country's oil exports drained US inventories to low levels.

Analysts warned the oil market was exposed to demand or supply side shocks.

US Energy Secretary Spencer Abraham said in Brussels he expected to meet OPEC ministers in Vienna next week but played down the prospect of an oil crisis linked to Iraq.

Abraham is due to visit Vienna on Tuesday and Wednesday for a conference on tackling "dirty bombs" – such as radiological devices – organised by the International Atomic Energy Agency.

The Organisation of Petroleum Exporting Countries will also be convening at its headquarters in Vienna on Tuesday.

"I won't be attending those (OPEC) meetings but I'm sure I will have a chance to talk to one or more of the OPEC ministers," Abraham said after signing an agreement bolstering US-EU cooperation on research into clean energy and alternative fuels.