Asia oil prices surge on Iraqi attacks on Kurds

Asia oil prices surge on Iraqi attacks on Kurds

SINGAPORE (Reuter): Asian crude oil prices surged to a four- month high yesterday after the United Nations delayed limited oil sales by Iraq after Baghdad sent troops into Kurdish areas, traders said.

SIMEX October Brent futures rose 82 cents to US$21.60 a barrel in early trading from Friday's London close in response to UN Secretary General Boutros Boutros Ghali's announcement on Sunday that he would delay the oil-for-food plan until he could assess the situation in northern Iraq.

Singapore gas oil swaps soared 50 U.S cents per barrel in early trade.

Iraqi tanks and troops captured Arbil, Iraqi Kurdistan's capital, on Saturday in the biggest Iraqi military incursion in the allied-imposed northern "no-fly" zone since the Gulf War.

Troops expelled one Kurdish faction and installed a rival group more favorable to Baghdad.

Oil prices began slipping from their highs around midday and lost further ground when UN relief officials and guards said Iraqi troops, heavy armor and artillery had evacuated Arbil. As of 0700 GMT October Brent had lost 30 cents from its high and was trading at $21.30.

"All Iraqis have left Arbil. We cannot see any more tanks or vehicles or artillery. They are about five kilometers (three miles) away now," one UN official in Arbil told Reuters.

There was no immediate reaction from the United States where President Bill Clinton had been conferring with American allies on how to respond to the Iraqi move.

Asian oil traders said they were now awaiting more news from the United Nations and the United States, the leader of the Gulf War coalition which defeated Saddam Hussein in early 1991 but left him in power.

"While the news (of the withdrawal) may cause levels to drift lower, the market would remain supported until we hear more of UN's decision on the oil deal," one broker said.

Boutros Ghali said he had "decided to delay the deployment of certain personnel who will supervise the implementation of Resolution 986", a reference to the Security Council document that sets out the oil-for-food plan.

The $2-billion oil-for-food plan would allow Baghdad to sell oil over six months to buy food and medicine in a temporary easing of UN economic sanctions imposed after Iraq invaded Kuwait in August 1990 and triggered the Gulf war.

Before the delay was announced, Baghdad had hoped to resume oil sales this month. Iraq, which holds the world's second largest oil reserves behind Saudi Arabia, has been effectively barred from oil shipments since the invasion.

The world oil market has been watching the plan's progress closely, fearing prices would slump when up to 700,000 barrels of Iraqi oil per day begins flooding the market.

Clinton has placed U.S. forces in the region on high alert and spoke by telephone on Sunday to several world leaders, including British Prime Minister John Major and Saudi Arabia's King Fahd, about the crisis.

U.S. officials, however, said Arbil was not in the zone placed off limits to Iraqi troops at the end of the Gulf war, oil traders noted. But U.S. officials said it was within the "no-fly zone" and UN resolutions broadly protecting Kurds against repression applied.

"We are watching the market closely. It will be a news-driven market for a while until the deal eventually pulls through," a broker said.

Brokers also noted that White House officials have said that the deal would go through because of its humanitarian aims despite criticism from Republican presidential candidate Bob Dole.