Oil extends rally on Iraq threats, Mideast strife
Oil extends rally on Iraq threats, Mideast strife
Reuters, London
Oil prices extended a week-long rally on Thursday as Britain and the United States reiterated threats to use force on Middle Eastern exporter Iraq, and violence flared in Israel.
Dealers said the bullish impact of escalating conflict in the Middle East, which pumps a third of world oil, was dampened by rampant quota busting by the OPEC cartel, which has lifted exports recently.
International benchmark Brent crude oil rose 31 U.S. cents to US$24.84 per barrel, bringing this week's gain to $1.49 so far. U.S. crude futures climbed 23 cents to $26.32.
"It's a combination of factors pushing it up, but Iraq is certainly on the front burner," said Nauman Barakat, a trader at FIMAT International Banque.
Blair said if Iraqi President Saddam Hussein failed to cooperate with a tough new United Nations resolution, he would be disarmed by force.
His comments to a NATO summit in Prague followed a tough warning by Bush that Saddam will have entered his "final stage" as Iraq's leader if he denies stocking weapons of mass destruction.
Saddam has already said Iraq is devoid of such arms, and plans to provide a list detailing its weapons programs by Dec. 8.
"The war premium is certainly coming back into the market," said Barakat.
Before this week's recovery, oil prices slumped by 20 percent in October and early November when Iraq accepted the return of weapons inspectors and OPEC supplies swelled.
"Oversupply by OPEC and unexpectedly large Iraqi exports have been pressing down on prices, but there is still the potential for a risk premium to return," said Tor Kartevold, oil trading adviser to Norwegian oil company Statoil.
"There is also the potential for an OPEC response if prices fall," he added, in reference to OPEC's forthcoming policy meeting on Dec. 12.
The Organization of the Petroleum Exporting Countries said earlier this week that its members pumped 2.8 million barrels per day or 13 percent above their official quotas last month.
If OPEC continues to pump at current rates, it would lead to a global rise in inventories over the winter, when stocks normally fall, the OPEC data showed.
Ali Rodriguez, oil company boss in OPEC member Venezuela, said the cartel would tackle the issue of overproduction at the Dec. 12 meeting, to be held in Vienna.