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Crude oil prices up after Iraq refuses weapons checks

World oil prices jumped sharply Friday when Iraq rejected US demands to allow weapons inspectors into the Arab oil exporting country.

Baghdad's rebuttal raised the likelihood of a US military attack on Iraq, which traders fear could spill over to other countries in the Gulf region, which pumps a quarter of world oil supply.

Prices drew further support from comments from OPEC, suggesting the cartel is unlikely to decide to increase output when it meets next week in Osaka, Japan.

Benchmark Brent crude oil for November delivery climbed US$0.58 to US$28.31 a barrel, while US crude rose US$0.93 to US$29.78.

Iraq's Deputy Prime Minister Tareq Aziz rejected the unconditional return of UN arms inspectors as demanded by Washington, saying the move would not avert US military designs on Baghdad.

"The return of inspectors without conditions will not solve the problem," Aziz told Dubai-based Arab satellite station MBC in an interview.

UN weapons inspectors responsible for accounting for Iraq's nuclear, chemical, biological and ballistic weapons were pulled out of Iraq in December 1998 on the eve of US British-bombing raids and have not been allowed to return.

US President George Bush told the UN General Assembly on Thursday that unspecified action against Iraq would be inevitable unless the UN forced Baghdad to eliminate weapons of mass destruction.

Friday, Bush said a new UN resolution demanding disarmament would contain deadlines of days or weeks, not months and years.

"It was an Aziz rally, because Iraq is not succumbing to US pressure, and obviously the hostilities become more of a reality," said Nauman Barakat, a trader at Fimat International Banque.

Sentiment was also buoyed by comments from OPEC Secretary General Alvaro Silva who said there was no shortage of oil in the world markets.

"The problem is not a shortage of oil," Silva said.

Silva, who flies to Japan shortly ahead of next Thursday's policy meeting, said he expected no problem in reaching a consensus in the 11-member exporters' cartel.

"It will be a brief meeting because we are not at our headquarters. We are planning to have a one day meeting only," he said.
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