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Crude oil prices soar to 12-year high

Up and up * Oil traded in New York has risen 40 percent since the end of November * In floor tradingWednesday, oil rose 4.6 percent to US$37.70 * US oil inventories fell 1 million barrels to 271.9 million barrels in the week ended Feb. 21.

Crude oil rose as much as 2.6 percent, to its highest price since Iraq occupied Kuwait in 1990, after the US Energy Department said oil inventories last week fell to the third-lowest level in at least 19 years.

Oil traded in New York has risen 40 percent since the end of November as a three-month strike in Venezuela reduced supply and the US prepares to force oil-producer Iraq to disarm. President George W. Bush said yesterday replacing Iraqi leader Saddam Hussein will curb financial support for terrorism, broadening his rationale for a military strike.

"The supply situation in the US and parts of Asia is very, very dangerous," said Tetsu Emori, a commodity strategist at Mitsui Bussan Futures Ltd. "It's easy for crude oil prices to reach US$45 to US$50" a barrel once a war starts in Iraq.

Crude oil for April delivery rose as much as US$0.96 to US$38.66 a barrel in after-hours trading on the New York Mercantile Exchange, the highest since October 1990 when oil touched US$41.15.

In floor trading on Wednesday, oil rose 4.6 percent to US$37.70, a 12-year closing high. Oil prices in New York have surged as much as 7.2 percent in two days and 81 percent in a year on concern an attack on Iraq may reduce supply from the Middle East, which supplies one-third of the world's oil.

Higher crude oil prices lead to rising prices for gasoline, heating oil and other fuels, boosting energy and transportation costs for industries, households, motorists and airlines.

The US says Iraq hasn't rid itself of weapons of mass destruction as it committed to do in the 1991 cease fire that ended the Persian Gulf War. The US still needs to persuade France, China and Russia to allow a UN Security Council resolution that may lead to an invasion of Iraq.

The "direct and growing threat" posed by Iraq must end, by force if necessary, President Bush told the American Enterprise Institute late yesterday in Washington. Bush said ending Hussein's regime would "deprive terrorist networks of a wealthy patron."

Iraqi President Hussein, in an interview to CBS television this week, denied he backs terrorist networks or that Iraq has weapons of mass destruction. He said he's ready to die rather than seek exile.

The US and UK have about 225,000 troops in the Persian Gulf ready to take military action.

US oil inventories fell 1 million barrels to 271.9 million barrels in the week ended Feb. 21, down 14 percent from a year earlier, the Energy Department said in a weekly report. The level is 0.8 percent higher than the 269.8 million barrels on Feb. 7, the lowest stockpile level since at least February, 1984.

Supplies of distillate fuels, which include heating oil and diesel, dropped below 100 million barrels for the first time since May 2000, and gasoline stockpiles declined for the fourth time in five weeks.

Oil stocks in the Organization for Economic Cooperation and Development countries in December fell to 107 million barrels below their year-earlier level, the International Energy Agency said this month. OECD groups the world's richest nations.
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