LONDON Ñ Oil prices will remain jittery despite a U.S.-led drive to
reduce tension in the Middle East.
Oil analysts said the price of oil remains heavily influenced by the
prospect of a Washington-led military campaign against Iraq. The analysts
said the industry believes that this will prompt a halt in Iraqi oil
supplies.
The focus of concern is June, after the current United Nations
oil-for-food program expires. Analysts believe that the Bush administration
will increase threats against Iraq and then launch an attack during the late
summer.
Analysts assess that until U.S. intentions toward Iraq are clear, the
price of oil will be up to $4 a barrel higher than normal. They envision a
confrontation between Baghdad and Washington over U.S. efforts to return UN
weapons inspectors to Iraq.
"There is no question but that the military campaign required to do so
would disrupt Iraqi oil supplies totally, although for how long is
uncertain," an analysis in PetroleumWorld.com says. "Until WashingtonÕs
intentions become clear, therefore, the market will remain nervous and the
current $3-4/B political price premium will continue.
The administration seeks approval for so-called smart sanctions that
will better define export controls to Iraq in exchange for renewed UN
weapons inspections. Russia, urged by the Saddam regime, has opposed smart
sanctions. So far, about $5 billion worth of Iraqi contracts are on hold in
absence of Security Council approval.
Last month, Moscow and Washington agreed on a list of items approved for
Iraqi import. The UN Security Council is expected to approve the Goods
Review List later this month.
Iraq has exploited higher oil prices to increase exports under UN
auspices. UN officials said Iraq exported 16.5 million barrels of oil during
the week that ended on March 29. The oil was exported at an average price of
$22.70 a barrel.
