Washington and London indicated over the weekend that the prospect of a war to topple Iraqi President Saddam Hussein in early 2003 was likely, and a British defence ministry source said the two allies were planning a seaborne invasion of Iraq.
With Venezuela still on strike and people talking about troops moving to Iraq and a war in January or February, there are plenty of nervous people in the market, a trader said. The US front-month oil futures were up 62 cents at $30.92 per barrel, adding to an 11-cent gain in New York trading on Friday.
Prices are hovering between the $30-per-barrel psychological support level and last weeks high of $31.25, the peak since September 24. The market stands some 50 cents short of a two-year high.
Preparing for a war, Iraq launched a public relations offensive against the US and Britain on Sunday, saying it had nothing to hide and was doing all it could to cooperate with the United Nations. But Washington was unmoved. While we have not given up on disarming Iraq through the UN, we are now entering a final phase in how we compel Mr Hussein to disarm, said a White House official.
President George Bush cancelled a trip to Africa at a few weeks notice and the US military advanced a buildup that could have more than 100,000 troops in the Gulf in weeks. In a Christmas message to the armed forces, British Prime Minister Tony Blair told troops to prepare for war.
Meanwhile, scores of UN arms inspectors were scouring Iraq for evidence of nuclear, chemical or biological weapons. A January 27 briefing by UN arms inspectors to the United Nations Security Council is widely seen as the next key date that could trigger a US-led war against Iraq. The market also drew support from turmoil in Venezuela, where attempts to break a general strike as it entered its fourth week failed to restore supplies in the fifth-largest exporter.
Venezuelan President Hugo Chavez said on Sunday his government had turned the tide against an opposition strike and was restarting halted oil output and exports, but strikers remained defiant. The president is lying, lying, lying... The oil sector is still paralysed, Horacio Medina, a strike leader in the giant state-owned oil company PDVSA, told local television.
OPEC oil powers sought to tame soaring prices on Friday by pledging to fill any supply gap left by the strike in Venezuela or a possible war on Iraq. Ministers said they saw no signs of a real shortage on world markets yet, but some thought OPEC should partially reverse a recently agreed output curb if prices stayed high. Shortages, when determined, will be made up. We want to have no imbalances in the market, Saudi Oil Minister Ali al-Naimi told reporters ahead of a meeting of Arab oil ministers in Cairo. (Reuters)