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.

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.

www.forbes.com Reuters, 03.07.03, 7:54 AM ET  By Tom Ashy LONDON, March 7 (Reuters) - The United States may not be the only country seeking to banish the ghosts of 9/11 in a war on Iraq. Saudi Arabia, whose citizens dominated the list of suicide plane hijackers, also has a chance to dispel any doubts about its allegiance using OPEC oil policy as its sword, oil analysts said. After 18 months of souring relations with its main Western ally in Washington, the world's top oil supplier is leading a move in the cartel ahead of a meeting on Tuesday to crank up exports to cover for an expected halt from Iraq. The extra oil, mostly from Saudi Arabia, would ease Washington's path to Baghdad by preventing oil prices rising much further, and strengthen Riyadh's role as central banker to the world oil market. "For Saudi Arabia the meeting is a golden opportunity to emphasize to the United States and other allies its role as a reliable supplier after an intense period of frought relations with Washington," said Raad Alkadiri of Petroleum Finance Corp. "For Riyadh it is a chance to shine, particularly in the eyes of Washington," he added. U.S. oil prices last week hit their highest level since the 1990 Gulf crisis at $40 per barrel and economists fear further rises will seriously dent world economic growth.

RESISTANCE Riyadh is pushing fellow members of the Organisation of the Petroleum Exporting Countries to agree a plan to suspend output restrictions when bombs start falling on their Gulf neighbour, delegates say. But it could meet resistance from other members of the group, such as Iran, which have little unused capacity and even less desire to help Washington's war plans. "The Saudis are keen to mend fences with Washington, but don't want to be seen doing so by the Arab street," said Leo Drollas of the Centre for Global Energy Studies. "They are choosing to do it via OPEC and not overtly, by preventing the oil market from exploding and being a reliable supplier of oil," he added. OPEC Secretary-General Alvaro Silva has said he does not envisage any suspension of quotas yet, but he conceded that the 11-member group has already set its output limits to one side to cover for an unexpectedly long strike in Venezuela. "The contingency plan depends on those few countries with spare capacity. If you have the barrels, you will be allowed to produce them," said an OPEC delegate, asking not to be named. Any contingency plan may not be adopted formally, delegates said, but Saudi Arabia wants to put the issue at the top of the agenda at Tuesday's meeting, which is otherwise expected to maintain the current group limit of 24.5 million barrels per day (bpd).

CONTROL As in 1990 when Iraq invaded fellow OPEC-member Kuwait, Saudi Arabia has the vast majority of spare global capacity and could once again see its control over the world oil market strengthened. In August 1990, when OPEC last suspended quotas, Saudi Arabia lifted output by more than two million bpd to 7.7 million. This time Saudi could hike output by another two million to 10 million, putting the Arab kingdom in sole control of almost a quarter of global oil exports. "This could reinforce the strategic value of Saudi Arabia to the United States," said Alkadiri. "At the same time as increasing production significantly it will stand to gain financially from $37 oil," he added. Independent observers say output has already advanced by a million bpd over its quota of eight million, in anticipation of war, and Riyadh has already seen an unexpected windfall from an Iraq-fuelled price spike. Drollas estimated that Saudi oil revenues will rise by $4.5 billion this year to $60.4 billion. The 1990 agreement was explicitly temporary, but the world's oil kingpin never looked back. Its output has not fallen below seven million since. "You can't argue with capacity. If you have it, you can use it," said an OPEC official. Alkadiri said the analogy with the previous Gulf crisis should not be taken too far, however. In 1990, both Iraqi and Kuwaiti exports were halted and retreating Iraqi troops torched Kuwait's oilfields. This time, many analysts expect only Iraqi flows to stop, possibly for a shorter period. "A lot depends on the spillover from the Iraq war and how long it lasts," Alkadiri said. "Longer-term issues of overcapacity will come back to haunt OPEC eventually."

businessresources.smh.com.au By Alex Lawler March 8 2003

OPEC, which pumps a third of the world's oil, may struggle to lower prices from among the highest levels in 12 years as the threat of war with Iraq builds and members near their limit for output.

Ministers meeting in Vienna on Tuesday would probably approve a plan backed by Saudi Arabia to pump as much oil as possible should a war disrupt supply from Iraq, the third-largest Middle East producer, officials and analysts said.

Oil prices last week reached the highest since Iraq invaded Kuwait in 1990 and touched $US39.99 a barrel in New York, raising fuel costs and threatening to stunt economic growth. Only Saudi Arabia and the United Arab Emirates have the capacity to refill US inventories, which set a 28-year low last month.

"There isn't enough OPEC capacity to cover the loss of Iraq," said Leo Drollas, deputy executive director of the Centre for Global Energy Studies in London. "We're entering a probable war with low inventory cover. Prices could go higher still as the war drums beat louder."

Ten OPEC countries set oil-output quotas as a way to control oil prices and supply, and member Iraq has no quota because its sales are under United Nations oversight. The group raised quotas in January and February after exports from Venezuela were crimped by a strike and a colder-than-normal winter raised demand.

Oil ministers will set policy for the second quarter as analysts expect any US-led attack on Iraq, source of 2.5 million barrels a day or 3 per cent of the world's oil, to take place within weeks. Oil demand normally declines after the first quarter because of the northern hemisphere spring.

Indonesia oil minister Purnomo Yusgiantoro said OPEC should keep quotas unchanged until the group knows the result of the stand-off between the US and Iraq. Saudi Arabia, the United Arab Emirates and Kuwait wanted to raise quotas, he said.

Whether OPEC suspends restraints or not, members are ignoring them. In February, all nations exceeded their output quota except Indonesia and Venezuela, members unable to pump more.

"They already have an informal understanding that everybody should produce as much as they can," said Adam Sieminski, an oil strategist at Deustche Bank. "Probably the best decision that OPEC could make is steady as she goes."

OPEC's oil production rose 6.3 per cent in February, the biggest monthly increase in four years, as output in Venezuela rebounded after the two-month strike and other nations pumped more, a Bloomberg News survey this week showed.

Analysts put OPEC's spare capacity at about 2 million barrels a day, less than Iraq's daily output. Two million barrels is enough to meet daily demand in France, the world's fifth-largest economy. The situation would worsen should Kuwait close oil fields in the event of war. Kuwait, OPEC's sixth-largest producer in February, said this week it would close all northern oil fields if the US attacks neighbouring Iraq to avert damage. The fields produce about 500,000 barrels a day.

Prices might not drop until additional oil from Saudi Arabia reaches consumers and the situation over Iraq becomes clearer, analysts said. Saudi Arabia was already producing about 9 million barrels a day, they said.

"The Saudis have dramatically increased their production," Mr Sieminski said. "That oil should be hitting the markets over the next few weeks, and assuming that things don't go badly in Iraq, we should begin to see inventories building. That should bring prices down."

Executives at companies including BP and Royal Dutch/Shell Group have said they expect a jump in oil prices should the US proceed with an attack on Iraq. Prices in London rallied to $US40.95 during the invasion of Kuwait, and sank to $US16 as the ejection of Iraqi troops neared.

The US and other importing countries hold inventories to alleviate shortages, which may have to be tapped should an attack disrupt Middle East shipments, analysts said.

Bloomberg

reuters.com Fri March 7, 2003 06:13 AM ET By Sujata Rao

LONDON (Reuters) - World oil prices held strong on Friday ahead of a key report on Iraq by United Nations weapons inspector Hans Blix.

Markets built on gains of over half a dollar chalked up on Thursday when President Bush accused Iraq of a "willful charade" and called for a new U.N. resolution within days to authorize disarming Iraq by force.

Brent crude futures for April stood 11 cents up to $33.64 a barrel by 5:45 a.m. EST while U.S. light crude CLc1 was steady at $37 a barrel.

"The market is going to be nervous ahead of the U.N. inspectors' report, but it's the diplomatic comment afterwards that is going to be more important," GNI-Man analyst Lawrence Eagles said.

"There will be a huge change in scenario only if there is a compromise that indicates more time will be given for inspections. But most people don't think that will happen."

Bush has called for a speedy second U.N. resolution vote. "We're days away from resolving this issue at the security Council," he said on Thursday. "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 U.N. 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 to launch an invasion of Iraq, which they allege holds biological, chemical and nuclear weapons.

The different points of view have sparked a hectic diplomatic dance with no indication yet of any compromise. Bush needs nine votes out of the 15-member Security Council, but Britain, Spain and Bulgaria are the only certain backers.

Chief U.N. weapons inspector Hans Blix is due to deliver his assessment of Iraq's cooperation with the searches at 1530 GMT.

A copy of the report obtained by Reuters disputes Iraqi claims to have destroyed bio warfare agents. It says Baghdad may be producing banned missiles but encourages more inspections.

ENERGY STOCKS LOW

The threat of war in the world's eighth largest oil exporter comes at a time when world energy stocks are far below normal levels, partly due to a strike in Venezuela which significantly slashed the country's oil exports.

Traders fear a war could disrupt Iraq's two million barrels per day exports, as well as flows from the rest of the oil-rich Middle East, even though the OPEC cartel has pledged to pump extra crude to make up for any loss in Iraqi supplies.

The cartel in January upped production by 1.5 million bpd to make up for the loss of Venezuelan barrels due to a strike.

Venezuela's President Hugo Chavez said on Thursday that crude operations were being restored as he lifted a two-and-half month long force majeure on exports. The force majeure, or formal suspension of contractual obligations, was put in effect soon after the strike began on December 2.

Chavez said crude production was at 2.6 million bpd plus 150,000 bpd of condensate, though rebel oil workers peg output at less than half that figure.

Weather also continues to boost oil prices as below-normal temperatures are forecast in the U.S. Northeast, which is also the world's largest heating oil market. U.S. heating oil stocks last week fell by half a million barrels.

But analysts say this may be the last of heating oil's strength as spring approaches and Venezuelan exports slowly rise.