Price of oil nears two-year high

WORLD oil prices rebounded yesterday towards two-year highs as the US said it had massed enough troops in the Gulf to attack Iraq, the world’s eighth largest oil exporter.

Futures traders were briefly spooked by an explosion on a fuel barge at an oil terminal in New York, but officials said it was an accident.

International benchmark Brent crude oil rose 65 cents to $32.21 a barrel, versus a two-year high of $33.10 hit last week. US crude futures climbed 72c to $35.46.

“The underlying strength still comes from Iraq, where there is every prospect of war,” said Christopher Bellew of brokers Prudential-Bache International.

US Defence Secretary Donald Rumsfeld said more than 150,000 troops were ready to move on Baghdad , while Turkey and the US moved closer to a deal over troops.

The global oil market had slipped on Thursday after US data showed an unexpected recovery in US commercial crude oil stocks from their lowest levels in 27 years.

However, prices are still some 50% up in three months as the market has absorbed the threat to Iraq’s two million barrel per day of exports.

“Oil prices are unlikely to shift too far away from a continuing upward bias until the Iraq situation moves to a more decisive phase,” said Paul Horsnell of investment bank JP Morgan.

Turkey held out hope for a late aid-for-bases deal with the US that would allow Washington to deploy tens of thousands of troops on Turkish soil for a possible invasion of Iraq.

Blistering cold weather in the north-eastern US has also boosted demand for heating oil in a world market that is otherwise suffering from slow growth.

Commercial US stocks of heating oil are running at almost 31% below last year, latest official data shows.

Inventories have also been crimped by a cut in supplies from Venezuela, which is struggling to restore normal exports after 10 weeks of strike by key oil company employees.