Oil holds strong as Bush calls for UN vote on Iraq

www.stuff.co.nz 08 March 2003

SINGAPORE: Oil prices held strong on Friday after President George W. Bush accused Baghdad of playing a "willful charade" and said he would push for a UN vote on a new resolution authorising the use of force to disarm Iraq.

US light crude for April delivery climbed nine cents to $37.09 a barrel.

Traders said steeper futures price gains for later months delivery reflected uncertainty over the timing of any war.

May crude rose 19 cents to $35.73, while June was up 27 cents at $34.03.

"Market sentiment is bullish but confused about the timing of a military strike. There may be two to three weeks delay as governments try to find some common ground for action," said Sydney-based independent oil analyst Simon Games-Thomas.

At a news conference, Bush said he would within days force a vote seeking UN authorisation to invade Iraq.

"We're days away from resolving this issue at the security Council," Bush said. "It's time for people to show their cards, to let the world know where they stand when it comes to Saddam Hussein."

Washington, backed by Britain, has met stiff opposition for a new UN resolution paving the way for war from Russia, France and China, which hold veto powers on the Security Council and have called for more time for weapons inspections to continue.

The United States and Britain have moved about 300,000 troops into the Gulf region ready to launch an invasion of Iraq, which they allege has stocked biological, chemical and nuclear weapons.

Chief UN weapons inspector Hans Blix is due to deliver later on Friday his latest assessment of the inspections mission and Iraq's cooperation with the searches.

Bush needs nine votes of the 15-members of the UN Security Council, but to date has only three certain backers - Britain Spain and Bulgaria.

VENEZUELA LIFTS FORCE MAJEURE

Iraq is the world's eighth biggest oil exporter, selling roughly two million barrels per day overseas, and traders worry that a military strike may stop supplies.

In addition, they fear oil flows may be disrupted from other producers in the Middle East, which pumps about 40 percent of globally traded crude.

The threat of war comes as world fuel stocks are running below normal levels, partly due to an continuing anti-government strike in Venezuela, which slashed the country's oil exports at one point to a trickle.

Venezuela is the world's fifth biggest exporter of crude and refined oil products, supplying 13 percent of imports into the United States.

President Hugo Chavez on Thursday lifted a force majeure - invoked when a supplier cannot meet its contractual obligations - on Venezuela's exports, the strongest signal yet that South America's biggest producer was restoring petroleum operations.

The force majeure has been in operation since soon after the strike to topple Chavez began on December 2.

"We have decided to suspend the force majeure on all of (state oil company) PDVSA's operational activities...we guarantee operations to the entire world," Chavez said.

He said crude production had been restored to 2.658 million bpd plus an additional 150,000 bpd of condensate, or super light crude. Rebel PDVSA workers on Wednesday pegged production at 1.1 million bpd.

Venezuela pumped 3.1 million bpd in November before the strike, with oil shipments abroad running at 2.7 million bpd.

Before the strike, Venezuela was the third largest producer in the Organisation of the Petroleum Exporting Countries, which raised its production limits in January by 1.5 million bpd to largely offset the loss of Venezuelan supplies.

Opec, which is dominated by Middle East producers, has pledged to make up for any losses in Iraqi supplies due to war. The cartel will meet in Vienna on Tuesday.