Oil edges higher after sharp Iraq-led fall

Oil edges higher after sharp Iraq-led fall

Richard Ayton, Reuters, London

Oil prices firmed on Thursday, shell-shocked after a drop to eight month lows on Iraq's acceptance of new United Nations weapons inspections.

International benchmark Brent crude oil was 21 cents higher at US$22.91 a barrel, having slumped by over a dollar on Wednesday after Iraq's letter of acceptance was delivered to the U.N., easing fears of an imminent assault by the United States against the oil producer.

U.S. crude futures traded on an after-hours electronic system were 22 cents up at $25.41.

U.S. President George Bush warned Iraqi President Saddam Hussein he would be judged by his actions, not his words.

"If he chooses not to disarm, we will disarm him. That should be clear to Saddam Hussein and everybody else."

Any U.S. intervention in Iraq could near double the price of crude oil, Venezuelan President Hugo Chavez said on Wednesday.

Speaking in Colombia, the leader of the world's fifth largest oil-producer said: "An Iraq war could push the oil price over $40, according to certain scenarios we have been evaluating in OPEC."

Traders' fears a war would cause disruption throughout the oil-rich Middle-East helped oil hit $30 a barrel in September, but the price has since deflated as increased production from OPEC members has reached the market.

OPEC in October pumped 3.21 million barrels per day above its self-imposed 21.7 million bpd production ceiling, according to a Reuters survey.

The cartel will meet on Dec.12 in Vienna to review production.

Venezuelan oil minister Rafael Ramirez has said the group would act to support prices if crude continues to fall.

Dealers are also awaiting Thursday's U.S. Department of Energy data on crude oil stocks in the United States.

Traders will compare the figures with Tuesday's American Petroleum Institute (API) data, which showed a surprise decline in U.S. oil stores.

Differences between the two bodies in accounting for oil in transit mean the official figures are expected to show stocks down by between three and four million barrels.

The API figures showed a 7.2 million-barrel fall in U.S. crude stocks in October, partly down to an earthquake in Alaska which disrupted the oil pipeline there.