Oil nears six-month high
14:42 EST Monday, March 11, 2002
Oil prices on Monday jumped toward their
highest level since September on fears of a
full-blown U.S. attack on oil exporter Iraq after
Baghdad ruled out a return of UN weapons
inspectors.
International benchmark Brent crude oil climbed 58 cents (U.S.) to $23.91 a barrel by mid-afternoon
in London, extending a rally that has added a quarter to the cost of a barrel in a month. U.S. light,
sweet crude added 48 cents to $24.32 a barrel.
Prices briefly hit a six-month high above $24 last week on a combination of Iraq war fears, a
strengthening economic recovery and deepening supply cuts by the OPEC cartel.
"It's very hard to see a downside to the oil price at the moment," said Geoff Pyne, an oil market
analyst for Sempra Energy Trading in London.
"If you view military action against Iraq as likely, which I do at some stage, then exports are almost
certain to stop and I would regard that as very serious," he added.
Traders have become increasingly nervous about U.S. intentions in Iraq after President George W.
Bush labelled its former Gulf war foe part of an "axis of evil" with Iran and North Korea, which was
amassing weapons of mass destruction.
The United Nations and the United States have been demanding that Baghdad allow inspectors to
return after a three year absence, but Iraqi Vice President Taha Yassin Ramadan said on Sunday
they were western spies and had no need to return.
Jordan's King Abdullah said on Sunday any U.S. attack on Iraq would have catastrophic
repercussions in the oil-rich Middle East, which holds some two-thirds of global petroleum reserves.
Any interruption in Iraqi supply, coming at a time when the economic recovery should be gathering
steam, could exacerbate the impact of OPEC's supply cuts, Mr. Pyne said.
Iraq accounts for five percent of world oil exports.
Talk by OPEC ministers of resuming a target of $25 for its oil exports, ahead of a policy meeting on
Friday, was another bullish factor for oil, dealers said.
OPEC Secretary-General Ali Rodriguez said in early March he expected the cartel of mostly Middle
Eastern exporters to freeze quotas for a whole year after a big cut in January.
Analysts believe the Organization of Petroleum Exporting Countries could drive prices back towards
their highest level in decades if the world economy recovers as expected.
"The main thing that concerns me is when OPEC decides to raise quotas. I think it ought to be
mid-year, but if they can avoid it they might well do so," Pyne said.
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