Oil Jumps as U.S. Plans Iraq Deadline

biz.yahoo.com Friday March 7, 3:22 pm ET

NEW YORK (Reuters) - World oil prices hurtled higher again on Friday as the United States and Britain set a March 17 ultimatum for Iraq to disarm or face war.

A revised draft resolution circulated by British Foreign Secretary Jack Straw at the United Nations, backed by Washington, gives Baghdad 10 days to meet U.N. demands.

The two allies during that time hope to garner support in the bitterly divided 15-member United Nations Security Council for military action against Iraq, which ships around 4 percent of world oil exports.

U.S. light crude climbed 78 cents to $37.78 a barrel, barely $2 short of a recent 12-year high. Brent crude futures rose 57 cents to $34.10 a barrel, a two-year high.

"News of that deadline is certainly keeping the market very strong," said broker Christopher Bellew of Prudential Bache in London.

"Any final deadline will give the market another shove to the upside," said Tom James of broker Carr Futures.

Oil prices have already jumped 20 percent this year on fear that war in Iraq will hit exports from the Middle East, which pumps a third of the world's oil. Concern is growing that rising energy costs will further strain a weak economy.

PRESSURE ON

Iraq's March 17 deadline puts pressure on the Security Council to adopt the resolution as soon as possible. The United States and Britain intend to bring the issue to a vote on Tuesday, diplomats said.

The new draft would order Iraq to give to inspectors "all weapons, delivery, support systems and structures" prohibited under U.N. resolutions as well as all "information regarding the destruction of such items."

While the United States and Britain have moved some 300,000 troops into the Middle East to prepare for the possible invasion of Iraq. French Foreign Minister Dominique de Villepin said on Friday that Paris could not accept the March 17 deadline.

France, a permanent member of the council with veto power, has been leading opposition in the 15-nation council to military action. Fellow veto-wielding council members Russia and China oppose war.

Secretary of State Colin Powell told the council on Friday that only the credible threat of force could ensure Iraqi compliance and the limited progress on disarmament was caused by the presence of the large military presence in the Gulf.

News of the planned new U.N. deadline came shortly after U.N. inspectors gave Iraq mixed grades on disarmament progress.

Chief weapons inspector Hans Blix told the Security Council Iraq had made some progress toward disarmament but its actions could not be considered immediate cooperation.

He said disarming Iraq would need more time.

An oil workers' strike in nearby Venezuela, and strong heating demand in a bitter northern winter has already drained U.S. fuel stocks. The government warned on Thursday that gasoline prices would hit record levels this summer.

Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries cartel, has said it will raise production to meet any shortfall international market

Consumer countries represented by the Paris-based International Energy Agency have also said they will release emergency stockpiles for the first time since the 1991 Gulf War if necessary.

Despite rising energy prices, the White House said on Friday that President Bush is only inclined to tap America's Strategic Petroleum Reserve in the event of an emergency.