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Oil prices close to 2yr highs
16/01/2003 09:56 - (SA)
Godwin Chellam
Singapore - Oil prices hovered close to two-year highs on Thursday after US crude stocks sank to near two-decade lows, reinforcing fears of a major supply crunch if war cuts Iraqi exports during the Venezuelan strike.
US light crude was four cents down at $33.17 a barrel at 08:09, after gaining US84c in New York on Wednesday, but hovered just below two-year highs of $33.65 struck in December.
Analysts said the rally in oil, which has risen more than 30% in two months, was far from over.
The gains have been driven by supply shortages, such as in the United States, where the US Energy Information Administration (EIA) said domestic crude inventories had fallen to near critical levels.
"Can't declare emergency"
In a weekly report, the EIA said US crude stocks fell 6.4 million barrels to 272.3 million by the end of last week, largely due to the scarcity of supply from strike-hit Venezuela.
The South American country normally supplies about 13% of US oil imports but its exports have been severely cut by the 45-day strike aimed at forcing President Hugo Chavez from office.
The EIA said stocks are now less than three million barrels above a "lower operational inventory level" of 270 million barrels, the minimum refineries need before they start to cut gasoline and heating oil.
The inventories are just two million barrels above the lowest level since the government started to keep records in 1979.
But despite the low stocks, the American Petroleum Institute, an industry body, said there was no need for the Bush administration to release emergency stocks from the US Strategic Petroleum Reserve (SPR).
Iraq
Fears war in Iraq could disrupt key Middle East oil exports also kept prices bubbling, traders said.
Russia began a peace mission to Baghdad on Thursday, a day after President George Bush warned Saddam Hussein his patience was running out.
The United States, continuing preparations for a potential war, formally asked its Nato allies for support in case of conflict with Baghdad, while Israel launched military and civilian defence preparations.
Nato officials said Washington had sought access to airspace, bases, ports and refuelling facilities.
Chief UN weapons inspector Hans Blix and Mohamed ElBaradei, head of the International Atomic Energy Agency, are due to go to Iraq on Sunday and Monday ahead of a key report they are due to deliver to the Security Council on January 27.
In Europe, Blix said Iraq needed to do "a good deal more to provide evidence if we are to avoid any worse development".
- Reuters
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