Oil price up after U.S. attacks

Oil price up after U.S. attacks

Reuters, London

Oil prices moved modestly higher on Monday as the United States and Britain launched retaliatory strikes on Afghanistan. London Brent blend crude added 22 cents to US$21.85 a barrel and U.S. light crude slipped eight cents to $22.47.

Dealers said the market reaction was muted because the allied strikes avenging the Sept. 11 attacks in the United States did not threaten Middle East oil supplies.

Oil exports from key Middle East suppliers including Saudi, Arabia, Iran and Iraq were flowing normally to world markets, industry sources said.

"Business is carrying on as normal," a shipping official in the region said. "I don't see why there should be an effect on operations here."

An Iraqi oil source said liftings of Basrah Light crude from the Gulf terminal of Mina al-Bakr were in fact running at high levels again, having dipped recently due largely to steep war- risk insurance.

And throughout the Gulf on Monday, it was business as usual.

"Our operations are running smoothly," said an Iranian oil source. "There is absolutely no disruption to our exports and we believe the situation is the same throughout the region."

Oil markets have been on tenterhooks since the suicide attacks on New York and Washington, awaiting a military response from the United States.

World prices rallied to $29 a barrel on Sept. 11 but since have slumped more than 20 percent because of flagging petroleum demand in the face of a world economic downturn.

Analysts are still worried that the allied action might spread to the Middle East.

"It's pretty much impossible to have a war without some premium on the price of oil," said Sarah Emerson of Energy Security Analysis in Boston.

Iran, the second biggest OPEC producer after Saudi Arabia, said the U.S.-led military strikes on neighboring Afghanistan were "unacceptable".

Iraqi President Saddam Hussein, who has been under U.N. sanctions since Baghdad's invasion of Kuwait in 1990, said the attacks would destabilize the world and might expand to include other countries.

OPEC wants to keep oil around $25 a barrel for a reference basket of seven crudes. The basket stood at $20.09 on Friday, the tenth consecutive day it has languished below a $22-$28 range used by OPEC to determined increases or decreases in its supplies.