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Last Updated:  Monday, 10 March, 2003, 18:50 GMT
Oil marches higher on war fears
Iraqi oil worker
Opec prepares contingency supply plans
Oil prices have climbed to fresh two-year highs as Washington continues to be bullish about winning a United Nations vote to attack Iraq.

"I think we are in striking distance of nine or 10 (votes), but we'll just have to wait and see," US Secretary of State Colin Powell said on Sunday, predicting a vote this week.

The rise comes ahead of an Opec (Organisation of Petroleum Producing Countries) meeting on Tuesday to prepare contingency supply plans in case there is a war.

Opec has offered to scrap limits on how much oil its members pump, and says it has 3-4 million barrels a day of excess capacity.

But oil analysts are warning that with many members already pumping well over quota, the headroom may be much more limited.

And on Monday, Iran indicated it was opposed to the idea of Opec suspending output quotas in the event of war on Iraq.

Iranian Energy Minister Bijan Zanganeh said the cartel should refrain from taking decisions that would imply support for a "US military assault against one of Opec's members".

"There is no shortage of oil in the market and present prices are not at all indicative of the market situation," he said.


The price of North Sea Brent crude rose to a high of $34.55 a barrel during the day - its highest level since November 2000 - before dipping to $34.05.

US light crude stood at $37.65, down 13 cents.

The dip came after US Energy Secretary Spencer Abraham said the US was prepared to release stocks from its strategic petroleum reserve "in case of severe disruption of supply".

Some Opec members have said they want to avoid a sharp oil price rise - calculating that it could damage the world economy, leading to lower demand and, in time, much lower prices.

"Our objective is to make sure we supply the market," said Algerian Oil Minister Chakib Khelil as he arrived for the Opec meeting in Vienna on Sunday.

Saudi Arabia, the only Opec producer with significant spare capacity, already has lifted output sharply in recent weeks.

Lowest reserves since the 1970s

The statement from Iran's energy minister is likely to mean the two major oil producers will clash head-on at the meeting.

Opec supplies more than one-third of the world's crude.

Opec's stated objective is for a notional barrel of Opec oil to trade at $22-28 - a price it views as fair.

Oil producing countries fear the International Energy Agency could repeat its actions during the Gulf War when it released emergency reserves and knocked $10 a barrel of the price of oil in a day.

US reserves are at their lowest levels since the 1970s Arab oil embargo.

The BBC's Marcia Hughes
"Chopping up oil supplies could help stop oil prices spinning out of control"

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