War fever drove US oil prices to a new 19-month high yesteday as dealers took fright at the growing threat of a US assault on Iraq.
US crude futures in electronic trade by 0520 GMT jumped US$0.57 to US$30.41 a barrel after setting a high of US$30.48.
Dealers said Baghdad's decision to reject any new UN resolution on weapons inspections, combined with Israel's siege of Palestinian leader Yasser Arafat's Ramallah headquarters drove the gains.
PHOTO: REUTERS
"The US wants a new resolution and Saddam is rejecting that -- that's bullish. With Ramallah as well the tension is getting very high," said Gary Ross of Petroleum Industry Research Associates (PIRA) in New York.
Sustained tension in the Middle East has already helped force up oil prices some 40 percent this year on fear of a supply disruption in a region that pumps a third of the world's crude.
The threat of a US-led strike on Iraq grew after Baghdad vowed on Saturday to reject any new Security Council resolution differing from an agreement reached with the UN secretary-general.
The Middle East-dominated OPEC cartel has said it will move to make up for any supply disruptions but could not guarantee to quell a speculative oil price spike driven by war fever.
OPEC last week opted to hold official output limits at the lowest level in a decade, defying consuming countries calls for more oil ahead of the northern winter.
"I cannot believe Saudi Arabia will let the market overheat for any length of time," said Raad Alkadiri of Washington's Petroleum Finance Co.
"They have signalled time and again they are willing to make up for any shortfall. Their credibility as the world's strategic supplier demands that."
Gains have accelerated on word from the International Energy Agency, which controls emergency stocks among 26 industrialised oil consumer nations, that it would not order a release if a war stopped only Iraqi exports.
"No, I don't think so, no, because we have had such an erratic performance in output from Iraq," the IEA's Executive Director Robert Priddle said.
Iraqi exports have been running below normal because of tough pricing controls imposed by the UN.
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