War fever forces up oil price to 19-month peak
War fever forces up oil price to 19-month peak
Andrew Mitchell, Reuters, Osaka
War fever drove U.S. oil prices to a new 19-month high on Monday as dealers took fright at the growing threat of a U.S. assault on Iraq.
U.S. crude futures in electronic trade by 0520 GMT (12.20 p.m. Jakarta time) jumped 57 cents to US$30.41 a barrel after setting a high of $30.48.
Dealers said Baghdad's decision to reject any new U.N. resolution on weapons inspections, combined with Israel's siege of Palestinian leader Yasser Arafat's Ramallah headquarters drove the gains.
"The U.S. wants a new resolution and Saddam is rejecting that -- that's bullish. With Ramallah as well the tension is getting very high," said Gary Ross of Petroleum Industry Research Associates (PIRA) in New York.
Sustained tension in the Middle East has already helped force up oil prices some 40 percent this year on fear of a supply disruption in a region that pumps a third of the world's crude.
The threat of a U.S.-led strike on Iraq grew after Baghdad vowed on Saturday to reject any new Security Council resolution differing from an agreement reached with the U.N. secretary- general.
The Middle East-dominated OPEC cartel has said it will move to make up for any supply disruptions but could not guarantee to quell a speculative oil price spike driven by war fever.
OPEC last week opted to hold official output limits at the lowest level in a decade, defying consuming countries calls for more oil ahead of the northern winter.
"I cannot believe Saudi Arabia will let the market overheat for any length of time," said Raad Alkadiri of Washington's Petroleum Finance Company.
"They have signaled time and again they are willing to make up for any shortfall. Their credibility as the world's strategic supplier demands that."
Gains have accelerated on word from the International Energy Agency, which controls emergency stocks among 26 industrialized oil consumer nations, that it would not order a release if a war stopped only Iraqi exports.
"No, I don't think so, no, because we have had such an erratic performance in output from Iraq," the IEA's Executive Director Robert Priddle told Reuters in an interview.
Iraqi exports have been running well below normal because of tough pricing controls imposed by the United States and Britain in its U.N. oil-for-food program.
The words reinforced concern that world oil supplies would not be topped up automatically in the event of military conflict. "The statement by Priddle is very important. In 1990 the IEA released oil almost immediately," said PIRA's Ross.
Economists have warned the fragile U.S and Asian economies are in no state to absorb further gains in oil prices, which hit drivers at the gasoline pump, eat into company profits and hamper growth.