Oil surges to 12-year high as war looms

CRUDE oil surged to a 12-year high for the second straight session as the US and Britain continued preparations to disarm Iraq

President George W Bush, seeking to build support for an attack, said the overthrow of Iraqi leader Saddam Hussein would foster stability in the Middle East. An attack would come with US oil inventories close to a 28-year low and petroleum demand rising because of unusually cold weather. “There’s been a deep freeze in the world’s biggest consuming nation for the past two months, which is draining stocks. Prices should be higher,” said Mike Fitzpatrick, a broker at Fimat USA Inc in New York.

Crude oil for April delivery was up $1.95, or 5.2%, at $39.65 a barrel as of 11.14am on the New York Mercantile Exchange. Oil rose to $39.99 in earlier trading, the highest price since October 12, 1990, when Iraq’s occupation of Kuwait led to the cut-off of exports from both nations. Oil is heading toward its biggest weekly gain since April.

Prices rose as high as $41.15 in October 1990, a record for the futures contract, which began trading in 1983.

In London, the April Brent crude-oil futures contract was up 28 cents, or 0.9%, at $33.35 a barrel on the International Petroleum Exchange.

“Bringing stability and unity to a free Iraq will not be easy,” Mr Bush said late yesterday in a speech to the American Enterprise Institute. “Yet that is no excuse to leave the Iraqi regime’s torture chambers and poison labs in operation. Any future the Iraqi people choose for themselves will be better than the nightmare world Saddam Hussein has chosen for them.” The US and UK have sent about 225,000 troops in the Persian Gulf region, where about a quarter of the world’s daily oil supply is pumped.

Mr Bush is trying to gather support for his view that Iraq has failed to comply with UN resolutions that require the country to rid itself of weapons of mass destruction. The US and Britain have presented a resolution to the UN Security Council saying Hussein missed his last chance to comply.

France, China and Russia, the other permanent council members with the power to veto resolutions, want UN weapons inspectors to continue searching Iraq.

The inspections began in November. A UN spokesman said the world body hasn’t received any information from Iraq that it’s prepared to destroy its Al-Samoud-2 missiles. Egypt’s Middle East News Agency, citing unidentified Iraqi government officials, said Iraq would destroy the missiles, as ordered by the UN.

Turkish Defence Minister Vecdi Gonul said his government has reached agreement with the US on the use of bases near the Iraqi border in the event of war. Turkish lawmakers deferred a vote on the accord.

The Organisation of Petroleum Exporting Countries (OPEC), supplier of a third of the world’s oil, must boost output at its March 11 meeting to lower prices, Kuwaiti Deputy Oil Minister Issa al-Aoun said yesterday.

OPEC is concerned about rising prices, although recent gains are caused by the threat of war rather than shortages of supply, OPEC Secretary-General Alvaro Silva told a news conference in Vienna.