War-wary oil prices keep on rising

War-wary oil prices keep on rising

War or no war, the oil market is tight

Mounting tension ahead of a United Nations deadline on Iraq has continued to power oil prices higher in Europe and the United States.

Six days ahead of a UN deadline for Iraq to begin destroying banned missiles, oil traders have continued buying, despite strong gains last week.

In London, the benchmark Brent crude oil climbed 91 cents per barrel to $33.18 and in New York light crude was 90 cents higher at $36.48.

Oil markets are betting that an attack in Iraq may lead to broader disruption around the Middle East, which supplies about two-fifths of globally traded crude.

Ups and downs

In the longer term, regime change in Iraq should help liberate supplies from what is potentially the world's second-biggest producer.

Opec's pledge

First of all we wish not to see a war, but if anything happens to the oil market...then Opec for sure will take appropriate actions to maintain the demand and supply....

Opec president Abdullah al Attiyah

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But analysts argue that the fundamentals of the oil market mean that prices should keep on marching higher.

Separately on Monday, the Iranian Government said there was no reason for the Opec oil cartel to consider cutting output at its next meeting.

Brokerage Merrill Lynch has revised its 2003 price forecast for US light crude to $28.50, from $24.

The firm argued that slender stocks of oil, strong demand and scarce production capacity should all help keep the market tight this year - with or without a war.

Coping with high prices

Now, oil prices are on average almost 60% higher than they were a year ago.

This has already sparked disquiet among many economic policy makers in Europe and the US, which are reliant on imported oil.

It is also starting to hit consumers on both sides of the Atlantic.

Ideas to cope with - or reverse - high oil prices were among the topics under discussion at the weekend among finance ministers from the Group of Seven industrialised nations, and are likely to remain at the top of the agenda this year.