Oil prices hit two-year high as Iraq rejects UN peace force

OIL prices rose to a two-year high after Iraq said ‘no’ to United Nations peacekeeping troops in Iraq under a Franco-Germany strategy to avoid Gulf war II.

The rise came despite international resistance to a US-led war in Iraq, after the head of the world’s biggest oil company said US strategic reserves should not be used to curb prices.

France and Germany wanted the peacekeepers to be present while UN inspectors stripped Iraq of its weapons of mass destruction.

Iraqi Foreign Minister Naji Sabri said: “No Iraqi would accept the deployment of such a force.”

A threatened US attack on Iraq might jeopardise shipments from the Persian Gulf, source of a quarter of the world’s oil, traders said, as the price of crude rose.

In London, the March Brent crude-oil futures contract was up 60 cents, or 1.9%, at $32.30 a barrel on the International Petroleum Exchange.

The US and Britain are heading for a showdown with the French and German governments, which support continued arms inspections and want more monitors sent to Iraq.

France, Germany and Belgium vetoed a proposal on Monday to equip North Atlantic Treaty Organisation member Turkey with missiles to defend itself against a possible attack by neighbouring Iraq.

Recent data showing US. oil inventories at seriously low levels have prompted expectations that Washington might be considering releasing crude from the national petroleum reserve to dampen demand.

Oil’s recent strength has also been driven by a deepening heating oil crunch in the US, which has pushed prices to record highs as temperatures dropped well below normal.

Forecasts for the US north-east, the world’s largest heating oil market, showed frigid temperatures this week that could add pressure to already thin stockpiles.

US refiners have cut back operating rates because of high crude oil prices, while Venezuela’s strike-bound refineries, big suppliers to the United States, remain well below capacity.

Shell has seen its last quarter profits rise by 46% because of higher oil prices.

The group says profits for the fourth quarter rose to £1.7 billion, helped by the average oil price rising to $26.80 (£16.34) a barrel compared with $19.40 (£11.82) in the same period the previous year.