Oil rises post-Powell speech
Crude remains strong after U.S. Secretary of State's presentation to the U.N. on Iraq situation.
February 5, 2003: 12:39 PM EST
LONDON (Reuters) - Oil prices stayed strong Wednesday afternoon following U.S. Secretary of State Colin Powell's speech to the U.N. Security Council in which he presented evidence that he said proved the Bush administration's belief that Iraq is hiding weapons of mass destruction.
In London, Brent crude for April delivery gained 51 cents a barrel to $31.26 while light crude for March delivery rose 44 cents to $34.02 a barrel on the New York Commodities Exchange.
"War is something that's very much inevitable," said Paul Bednarczyk, analyst at economic consultancy 4cast. "The market keeps trying to price that in, and I think prices must be fairly near the top."
Prices had already climbed sharply earlier Wednesday as dealers began to anticipate that Powell's U.N. address would increase momentum for a U.S.-led war on Iraq, which traders fear could disrupt supplies not only from Iraq but from elsewhere in the oil-rich Middle East.
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In a briefing that began roughly at 10:30 a.m. ET and lasted around 90 minutes, Powell said that Iraq has made no effort to disarm and has been allowing members of the al Qaeda terrorist network to operate freely in the country for the last eight months.
Many Security Council members want to give weapons inspectors more time to carry out their work in Iraq, but the United States has said Baghdad has weeks, not months, to give up suspected arms or face a U.S.-led military campaign.
Chief U.N. inspector Hans Blix has also said that time was running out. On Tuesday, he warned Iraq that it was "five minutes to midnight" and that Baghdad urgently needed to show it was cooperating with inspectors.
Blix, along with his colleague Mohamed ElBaradei, in charge of nuclear arms teams, will go to Baghdad Saturday and Sunday at Iraq's invitation.
He will report back to the U.N. Security Council Feb. 14, possibly for the last time before a U.S. invasion.
Iraqi President Saddam Hussein, in a rare television interview broadcast Tuesday, denied Baghdad had weapons of mass destruction or links to the al Qaeda network blamed for the Sept. 11, 2001, attacks.
"There is only one truth, and therefore I tell you as I have said on many occasions before, that Iraq has no weapons of mass destruction," he said.
Analysts and dealers said that the market was also driven higher by data Wednesday showing a steep drop in stocks of U.S. oil products as seasonal maintenance reduced output from U.S. refineries.
Overall crude stocks fell slightly, according to industry figures, but rose slightly, according to government statistics as a two-month-old strike in Venezuela, the world's fifth largest oil exporter, relinquished its stranglehold.
Venezuela's striking oil workers said Tuesday crude output was 1.2 million barrels per day (bpd), although President Hugo Chavez, whom the strikers are trying to force to resign, said output was approaching 2 million bpd.
In January, the Organization of the Petroleum Exporting Countries (OPEC) agreed to increase output to help compensate for the effects of the Venezuelan strike.
But last weekend, OPEC ministers warned that as Venezuelan crude was coming back onstream, there could be a supply glut by the second quarter when demand traditionally drops off with the end of cold weather in the Northern Hemisphere.
Analysts also predict that the war premium built into prices will quickly melt away provided that any war against Iraq is short-lived.
A Reuters survey found Wednesday that OPEC's January production rose 380,000 bpd from December to 25.65 million bpd, but remained 1.67 million bpd below November levels, before the Venezuelan strike.
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