Oil ticks higher as U.S. says time short for Iraq

Oil ticks higher as U.S. says time short for Iraq

Reuters, London

Oil prices ticked higher on Monday as top U.N. weapons
inspectors spent a second day in Iraq and the United States said
time was running out for Baghdad to prove compliance with
disarmament resolutions.

London Brent blend in early trade added 19 U.S. cents to
US$30.73 a barrel. U.S. crude, closed on Monday for Martin Luther
King day, set a new two-year high of $34 a barrel on Friday.

Washington on Sunday issued one of its clearest warnings yet
to Iraqi President Saddam Hussein that non-cooperation with U.N.
inspectors could be deemed a trigger for a war in the absence of
a "smoking gun", or hard evidence of weapons of mass destruction
-- and that a decision could be just weeks away.

"The test is, is Saddam Hussein cooperating?" said U.S.
Defence Secretary Donald Rumsfeld on weekend television. "He's
not doing that."

Rumsfeld, presiding over a huge U.S. military build-up of
warplanes, ships and tens of thousands of troops in the oil-rich
Gulf region, said a final conclusion on Iraqi cooperation could
be made "in a matter of weeks, not in months or years."

"Of course Rumsfeld is a hawk, but if the test of compliance
is cooperation then clearly Saddam is not cooperating," said oil
broker Nauman Barakat of Fimat International Banque.

Chief U.N. weapons inspector Hans Blix and Mohammad ElBaradei,
head of the U.N. nuclear watchdog, say there are big gaps in
Baghdad's arms declarations, and are demanding quick answers
before they report to the Security Council on Jan. 27 on Iraqi
compliance.

"I think (the Iraqis) have said that there are still certain
areas they are ready to provide more information. I think that in
other areas they said they are ready to reconsider their
position," ElBaradei said in an interview with Reuters.

"What we tried to do today at this meeting is to impress on
the Iraqi authorities that the time is running out."

U.S. national security adviser Condoleezza Rice, on U.S.
weekend television, said: "Clearly the 27th is an important
date ... (It) probably marks the start of a last phase of
determining whether the Iraqis have fully complied."

From Beirut, a special envoy of Saddam's dismissed talk of the
Iraqi president going into exile.

"As we have said before, we reiterate now that this is merely
nonsense and one of the tactics of psychological warfare," said
Ali Hassan al-Majeed, a member of the Revolutionary Command
Council and a cousin of Saddam.

Rumsfeld said he hoped Saddam would choose exile, but he was
unsure of the prospect. "There is at least a possibility," he
said. "His neighboring states are in a process now of trying to
avoid a conflict there by having him leave the country."

Saddam remained defiant.

"After putting our faith in God, victory is absolutely
assured. We don't see it on the horizon, rather it is in our
grasp and inside our chests," he told a group of army officers.

Oil traders said Venezuela's general strike, now in its
seventh week, also was keeping the heat under crude prices.

Venezuelan President Hugo Chavez said on Sunday he was
"winning the oil war," restoring crude flows and restarting ports
and refineries. He said oil output which fell to 500,000 barrels
per day this month was now at 1.2 million bpd, versus three
million bpd normally.

Striking oil workers said that production was only half the
volume given by Chavez.

Leading OPEC producer Saudi Arabia is moving to fill the gap
by raising output by between 500,000 and one million barrels a
day, industry sources said.

Riyadh is opening up the taps and by February could be pumping
nine million bpd, the industry sources said on Sunday from eight
million recently.

"The Saudis are cranking it up. The message is that there is a
big increase on the way," said one senior Western oil executive.