Crude tests new peaks as Iraq suspends exports

By Our City Staff

OIL PRICES climbed to a new post-Gulf War peak yesterday, to the alarm of stock and bond markets, after Iraq suspended oil exports under the latest six-month phase of its oil-for-food exchange with the United Nations.

In London, January Brent futures opened at $25.90, the highest since January 1991, up from Friday's close of $25.04.

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. It could take the price to $30 a barrel, although the short-term outlook would depend on the mildness of the winter.

"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.

Iraq's announcement follows an agreement by the big producers to limit supplies in order to run down oil stocks. Opec has said it will maintain the restrictions until at least March. Some producers wanted to extend the production curbs beyond that.

The jump in oil prices unsettled European shares. "We are revisiting the worries that we saw earlier in the year when the oil price started to climb," said David Coleman, economist at CIBC World Markets.

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