Winter fears push up oil price

Iraq wants to force its customers to break the UN sanctions regime

Oil prices are close to a five-week high again, amid worries over low oil stocks in the United States, fears of a cold winter and uncertainty over Iraqi exports.

In Asia and in New York, the price of a barrel of Nymex crude oil rose as high as $35.65 - up 71 cents. In London, on barrel of Brent Crude oil currently trades at $33.75.

Crude and heating oil inventories remain alarmingly, stubbornly low

Bill Richardson, US energy secretary

The latest boost to prices came after the US Department of Energy reported that heating oil stocks had dropped by half a million barrels to 47.8m - nearly a third less than at the same time a year ago.

Marketwatchers now fear that a cold winter in the US could boost demand for oil to levels the market cannot meet.

Traders said there was actually an adequate supply of crude oil on the markets, but that high prices had persuaded many to delay replenishing their stock of oil products.

Energy analyst You Jing-feng of Morgan Stanley Dean Witter predicted oil prices could reach $40 by the end of the year, if it turned cold in the US.

US energy secretary Bill Richardson said on Wednesday that "crude and heating oil inventories remain alarmingly, stubbornly low".

Iraq raises the price

Another worry is the flow of oil from Iraq, which is selling its oil under a UN sanctions regime.

The government in Baghdad told buyers they would have to pay a 50 cents premium over the official selling price into an account not controlled by the United Nations - or lose new contracts.

This, however, would force traders to break UN sanctions. As most of them are unlikely to risk that, the flow of oil from Iraq could be cut back sharply from December onwards.

Iraq supplies about 5% of the oil available on world markets.