Oil nears $30 a barrel on Iraqi cuts

The price of oil has risen to a four-month high after Iraq cut exports ahead of the Organisation of Petroleum Exporting Countries (Opec) meeting on Tuesday.

The Iraqi government has confirmed it suspended crude exports on Monday in protest at a one-month extension of the existing "oil-for-food" sanctions regime.

Oil prices surged as Opec secretary general Ali Rodriguez raised doubts that the cartel's 11 members would raise production to fill the supply gap left by Iraq, which accounts for 5% of the world's crude supply.

"The main possibility is that we will not increase output but we will have to await the conference decision," Mr Rodriguez told the BBC.

"Our main objective is to achieve stability. We have a number of possibilities open to us. If prices remain over $28 barrel for more than 10 days then we will increase output."

Fears eased

But a more conciliatory tone struck by Opec president Chakib Khelil later on Monday eased fears of an oil shortage.

"We're going to make sure that demand is met," he said. "I'm not worried."

Supplies were "good and efficient", he added.

Confidence was further restored when Iraq's deputy oil minister, Taha Hmoud Mousa, said the country had suspended oil exports for a month, and not indefinitely, as earlier reports had indicated.

Oil prices, which rose sharply in London on Monday, sending Brent crude oil for July delivery to a four-month high of $29.71 fell back to $29.12 in late trade, up five cents on the day.

Opec not worried

Earlier, Mr Khelil had said he saw no reason to increase oil production because he did not believe Iraq would stop exports.

Asked what would happen if Iraq did halt exports, Mr Khelil replied: "Of course, we always meet demand in the market... whatever the reason may be."

Iraq produces three million barrels a day, 2.2 million of which are exported under the present sanctions rules via official routes.

Since sanctions were imposed on Iraq after the Gulf War in 1991, its output has not been counted as part of Opec's oil quota.

Sanctions tussle

Iraq's actions are in protest against Friday's resolution by the UN Security Council to extend by a month the existing sanctions regime under which Iraq is allowed to export oil in exchange for food and medicines

The UN move is intended to allow Britain and the US more time to persuade other Council members to back their proposals for new sanctions against Baghdad - designed to target the Iraqi Government rather than its people.

Iraq's Amer Muhammad Rashid: No plans to attend Opec meeting

Opec had been expected to leave output unchanged.

But Iraq's announcement has put it under pressure to increase production in order to make up the possible shortfall.

The 11-member cartel is responsible for 40% of the world's oil production.

It has so far rejected concerns that oil prices could soar in excess of $35 a barrel as they did last year, sparking fuel protests across Europe.

But some analysts fear price rises are inevitable if Iraq maintains its embargo.

Iraq's oil minister General Amer Mohammed Rashid says Baghdad's oil sales to neighbouring countries will not be affected by the decision, with road tanker deliveries to Jordan and Turkey expected to continue.