Crude oil had its biggest weekly gain since August as the return of UN weapons inspectors to Iraq renewed concern that a US-led alliance would use force to disarm the Persian Gulf oil exporter.
The US has said it's skeptical that Iraqi President Saddam Hussein will fully comply with a Dec. 8 UN deadline for a report on its arms programs. Russia says the US should work through the UN to disarm Iraq. President George W. Bush has pledged to protect Russian interests in Iraq. Oil has rallied 8 percent from a five-month low on Nov. 13 on mounting expectations of military action.
"You're seeing a war premium being plugged back into the price," said Bill O'Grady, director of fundamental futures research at AG Edwards & Sons Inc in St. Louis. "It looks like Bush won't give in and it's hard to imagine Saddam Hussein giving up his weapons."
Crude oil for January delivery rose US$0.41, or 1.6 percent, to US$26.76 a barrel on the New York Mercantile Exchange. The contract's 8.3 percent rally this week was the biggest for oil futures since the week ended Aug. 16.
In London, the January Brent crude-oil futures contract rose US$0.38, or 1.5 percent, to US$25.21 a barrel on the International Petroleum Exchange. Prices in London were up 8 percent this week.
UN arms inspectors were last in Iraq, the producer of 3 percent of the world's oil, in December 1998. Their search for chemical, biological and nuclear weapons begins next week.
The UN Security Council, under terms of a resolution passed this month, will have a chance to assess the seriousness of any Iraqi violation of the inspection requirements and to consider how to respond.