Ultimatum to Iraq pumps up oil prices

www.thestar.com Mar. 8, 2003. 01:00 AM

Venezuelan strike, cold winter drain U.S. fuel reserves Record gas prices likely this summer, Washington warns

NEW YORK—World oil prices hurtled higher again yesterday as the United States and Britain set a March 17 ultimatum for Iraq to disarm or face war.

A revised draft resolution circulated at the United Nations by British Foreign Secretary Jack Straw, 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 per cent 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," broker Christopher Bellew of Prudential Bache said in London. "Any final deadline will give the market another shove to the upside," said Tom James of Carr Futures.

Oil prices have jumped 20 per cent this year on fear that war in Iraq will hit exports from the Middle East, which pumps a third of the world's oil. Oil is almost 60 per cent more expensive than it was a year ago.

There also is growing concern that rising energy costs will strain a weak U.S. economy.

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.

An oil workers' strike in Venezuela and strong heating demand in a bitter northern winter have drained U.S. fuel stocks.

"It's still bitterly cold, and we just got six inches of snow,'' said T.J. Herlihy, a broker at Spectron Energy Inc. in New Canaan, Conn. "Winter's not over yet."

Washington warned Thursday that gasoline prices would hit record highs 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 says U.S. President George W. Bush is inclined to tap America's Strategic Petroleum Reserve only in the event of an emergency.

reuters news agency