Oil jumps in market flurry over Iraq raid

OIL prices bounced sharply yesterday on the news that the US had attacked Iraq, but analysts were sceptical that the rally could be sustained, writes David Bowen.

West Texas Intermediate for February delivery, the main US price marker, rose 46 cents to dollars 18.84 a barrel, before falling back by 20 cents. February Brent, the North Sea marker, which had fallen below dollars 17 for the first time since last spring, was trading at dollars 17.27 yesterday evening, although it closed at dollars 17.06, up from dollars 17.01.

Geoff Pyne, an analyst with UBS Phillips & Drew, said it was difficult to see why an attack on Iraq should restrict oil deliveries. 'If it led to the fall of Saddam, it could even lead to increased supplies, because the ban on Iraqi oil exports would be lifted,' he said.

New figures from the International Energy Agency confirmed that the problem of Opec overproduction remains. Members produced 25.3 million barrels per day in December, the most since 1980.

The weakness of the oil market was underlined by its failure to respond to a partial shutdown of North Sea production. Violent weather has restricted loading at terminals, forcing several platforms to stop producing. Norwegian production has been cut by 90 per cent, while Chevron UK said that production at the Ninian field - along with others that used the same pipeline - would have to stop if Sullom Voe on the Shetlands was not reopened.