Prices firmed amid doubts over plans by the US department of energy torelease oil from its Strategic Petroleum Reserve (SPR) via a swap with oilcompanies. The initial news on Sunday of the proposal for oil companies totake oil from the SPR and pay the government through a replacement ofbarrels later had dampened prices.

The long-term aim of the plan was eventually to put more oil back into theSPR. A short-term effect would be to lower prices. The US crude prices aresharply higher than the low of $10.35 per barrel hit in December 1998 asOpec output cuts tightened supplies and brought oil inventories down.

NYMEX crude reached $29.95 in late January, the highest price in nine years.The US energy secretary Bill Richardson said on Monday that the Clintonadministration had yet to approve the SPR swap plan. A White House officiallater said the plan was "not an option that's likely". These comments pushedprices up. News of lower exports by Iraq also provided support.

Taha Hmoud, undersecretary at Iraq's oil ministry, said on Monday thecountry's exports had dropped to 1.5-1.6 million barrels per day (bpd), wellbelow the 2.3 million bpd seen in recent weeks, because of a lack of spareparts and bad weather. Prices stayed firm despite remarks on Monday byMexican Oil Minister Luis Tellez that major producers did not want prices toaverage $30 a barrel a year and would act responsibly to prevent that.

Last week, Tellez said producers would make efforts to ensure that the oilmarket was not tight and that depleted inventories can be restored afterMarch. The market interpreted the comments as indicating that producerswould ease the current supply curbs after the expiry of the output cut pactat end-March.

The market is still trying to assess what Opec will do with its productionafter March, a decision that is likely to become clear only at Opec's March27 meeting. An Opec source had said key producers were inclined to keep theoutput cuts in place when they expire, and some Opec members have advocateda extension of up to six months.