Oil price hits post Gulf War high

Oil price hits post Gulf War high

War or no war, the oil market is tight

US oil prices have soared to a post Gulf War high as fears over a war with Iraq were compounded by a big drop in winter fuel stocks.

According to latest figures, US oil reserves have been badly dented by a cold spell in the North East of the country.

US light crude rose to $38.08 a barrel in after-hours trade on Wednesday - within reach of the all-time high of $41.15 hit in October 1990.

London Brent crude gained 75 cents to $33.07 a barrel.

'Physical shortages'

Some traders were predicting $40 a barrel was now within reach.

Paul Horsnell, oil analyst at JP Morgan, said: "These latest inventory figures are scary.

"We must now be getting very close to localised physical shortages."

US Energy Secretary Spencer Abraham said on Tuesday he would release crude oil from the 600-million-barrel national reserve if supplies suffer a heavy cut due to war.

But Washington has yet to make clear whether it thinks the suspension of Iraq's 1.7 million barrels a day of exports would be sufficient to warrant a release.

Saudi relief?

America's emergency reserve was last used in September 2000, when low stockpiles boosted prices to $37.80 a barrel.

Reserve oil was also released during the Gulf War.

Meanwhile, some reports suggested Saudi Arabia is preparing to increase oil production in the event of a US-led war with Iraq.

US sources quoted by Reuters news agency say the Opec giant is ready to ship an extra 1.5 million barrels a day if Iraqi production is interrupted.

OPEC has said it has enough spare capacity to cover any Iraqi shortfall.