Oil prices rally after Bush beats war drums

Oil prices rally after Bush beats war drums

Agence France-Presse London

Oil prices held above US$30 a barrel here on Wednesday amid mounting alarm at the prospect of a war in Iraq which markets fear could severely disrupt vital supplies from the key Gulf region.

The price of benchmark Brent North Sea crude oil for February delivery stood at $31.02 per barrel in early trading against $30.61 at the close of the previous session, when prices had gained 41 cents per barrel.

In New York, reference light sweet crude February-dated futures, which climbed 11 cents to $32.37 per barrel on Tuesday, rose further in after-hours trade.

"The more hawkish remarks from George Bush about Iraq and time running out for them to come clean on the armaments issue has helped underpin the rally," said Commerzbank analyst Steve Turner.

US President George W. Bush expressed mounting impatience with Baghdad Tuesday, warning that "time is running out" for Iraqi leader Saddam Hussein to avert war by heeding a UN disarmament ultimatum.

GNI analyst Lawrence Eagles added that although Bush said little that was new, his comments had nonetheless served to "underscore the US message and the potential for unilateral action despite European pressure for diplomacy."

Commerzbank's Turner said reports of supply disruptions from a number of North Sea oil rigs was a further factor which was helping to buoy Brent contracts.

Analysts said attention was switching towards the release of a weekly US inventory report due later which was expected to reveal a 1.6-million-barrel draw in crude stocks, partially offset by a rise in gasoline inventories.

Supply disruptions, stemming from the ongoing general strike in Venezuela, have hit US stock levels in recent weeks, although not as badly as many had feared.

That has led some commentators to speculate that fellow members of the Organization of Petroleum Exporting Countries have been pumping more oil to compensate for reduced Venezuelan shipments.

Eagles said although the market was expecting only a modest fall in US stocks, there was a danger the figures could lead traders to question whether the current high price was justified.

"Our feeling is that if the report were to come in around these levels the market would sell off," Eagles said.