Oil prices rocketed to a new nine-year high Nov. 22 after Iraq suspended oil exports under its humanitarian exchange program with the United Nations.
London January Brent futures opened at $25.90, the highest
oil price since January 1991 when allied forces were preparing to eject Iraqi troops from Kuwait.
Prices leapt as Iraq's Oil Minister Amir Mohammed Rasheed confirmed that Iraq had stopped oil deliveries under the latest six-month phase of its oil-for-food exchange with the UN. Baghdad protested the UN's proposal to extend by two weeks the sixth phase of the program and accused the United States of trying to push other Security Council members into accepting a draft resolution on weapons inspections.
Oil analysts said the loss of Iraq's 2.2 million barrels a day of exports from the 75 million barrels daily world market would exacerbate a looming supply shortage this winter.
"Against a background where inventories are already declining rapidly, and with the first bout of winter weather, the oil market is becoming uncomfortably tight," said David Knapp, head of the markets division at the International Energy Agency in Paris.
"Clearly the West doesn't want oil prices to go any higher and Saddam knows that," said Nauman Barakat of ABN Amro in New York of Iraqi leader Saddam Hussein. "His timing is impeccable."
However, U.S. officials said there was no immediate crisis. State Department spokesman James Rubin said there was "a lot of oil in the system."
OPEC Cuts Already Firmed Prices
Oil prices had already surged to their highest point since the Gulf crisis, as big producers kept a tight rein on supplies and ran down stocks of spare oil in industrialized countries.
Export cartel OPEC has said it will keep holding back supply until March and has yet to decide whether or not to ease the curbs at that time.
OPEC President Abdullah bin Hamad al-Attiyah said some producers wanted to extend agreed production curbs to end-June or even end-2000. "We will support any decision OPEC will take to stabilize the situation", said Attiyah, who is also Qatar's minister of energy and industry.
Saudi Oil Minister Ali al-Naimi last week moved to reassure oil consumers that OPEC exporters were responsible nations aware of the impact of their policies on the world economy.
"We are concerned about the welfare of the producer and the welfare of the consumer and also looking at the impact of our policy on the world economy," he said.
Naimi and his counterparts from OPEC's Venezuela and non-OPEC Mexico earlier will meet again in February to consider their next policy option before an OPEC conference on March 27.