World oil prices stayed firm on Monday, hovering just below $30 a barrel, as brokers speculated the weekend bombing in Bali would bolster international support for US President George Bush’s stance against Iraq.
The killing of at least 183 people on the Indonesian resort island on Saturday came a day after the U.S. Congress gave Bush authority for the possible use of force to disarm Iraq of suspected biological and chemical weapons and topple Iraqi leader Saddam Hussein.
US benchmark light crude was trading up 10 cents at $29,47 a barrel in the first trades since New York’s close on Friday, when it gained 40 cents following the congressional endorsement.
Brokers said the US hardline towards Iraq and other states it claims support acts of terror was expected to garner additional backing after the bombing, which killed mainly foreign tourists.
”The market was up 40 cents on Friday after Bush won domestic approval for an attack on Iraq. The bombing in Bali is going to harden attitudes of some of the other Western governments towards war,” said Simon Games-Thomas, head of energy at NM Rothschild & Sons in Sydney.
”This is another piece of the jigsaw for military action and takes some of the downside out of the market.”
The explosions heightened concerns the Islamic militant network al Qaeda, blamed for the September 11 attacks last year on the United States, has regrouped after it was routed from Afghanistan by US-led forces.
”The world must confront this global menace, terrorism,” Bush said in a statement released by the White House after the bombings in Bali.
The attack came less than a week after suspected suicide bombers rammed a French-flagged oil tanker off the coast of Yemen, causing an explosion and fire which gutted the vessel.
Bush has been pressing for the removal of Iraq’s Saddam, who he claims has amassed an arsenal of biological and chemical weapons and may even be close to nuclear capability.
Although Bush’s stance on Saddam is supported by Britain, Washington has yet to convince other permanent members of the UN Security Council — France, China and Russia — to agree to a tough new UN resolution leaving room for military action if Baghdad fails to meet terms for the return of weapons inspectors.
The possibility of a US invasion to unseat Saddam has pushed oil prices up more than 40% this year as traders fear any strike might lead to a spread of violence in the oil-rich Middle East and disrupt essential flows of crude oil.
Key members of the Opec producers’ cartel warned on Sunday of turmoil in global oil markets if the United States decided on a military strike.
Iran said any action could ultimately trigger a price collapse, while the United Arab Emirates said it would increase the present $5-a-barrel war premium, leading to instability.
”Currently oil prices carry a premium of more than $5 a barrel due to the political tensions,” UAE Oil Minister Obaid al-Nasseri said at an industry conference in Abu Dhabi.
”This is likely to increase in case the situation deteriorates, leading to a negative impact on oil markets and exposing them to turbulence and instability.”
Despite high oil prices, which some economists say could halt the fragile economic recovery, other Opec officials said at the weekend they saw no need to inject more crude into the market, implying current levels were due to war jitters rather than shortage.
”The market is stable, the prices are stable and supplies are not bad. There is no justification for an increase for the time being,” Algerian Oil Minister Chakib Khelil said in Abu Dhabi.
The Organisation of the Petroleum Exporting Countries agreed last month to keep official output limits at a decade low of 21,7-million barrels per day, but the group is producing in excess of two-million bpd over the ceiling.
OPEC is due to meet on December 12 to review market conditions and output policy. – Reuters