LONDON – Oil prices surged to their highest levels in a year on Friday on mounting fears of war in oil exporter Iraq after U.S. and British planes bombed targets there on Thursday.
U.S. President George W. Bush rang heads of state in France, China and Russia ahead of what some British media are dubbing a "war summit" this weekend with ally Prime Minister Tony Blair.
International benchmark Brent crude oil, which has already climbed more than a third this year on war fears, jumped $1.09 to $28.75 a barrel in London, its highest level since September last year.
U.S. crude soared $1.05 to $30.03, also close to a year-high.
"The war drums are pushing the price higher," said Leo Drollas of the Centre for Global Energy Studies in London.
Traders fear that a massive U.S. attack on Iraq would sow chaos in the Middle East Gulf region, home to two-thirds of the world's oil reserves.
Former Saudi Oil Minister Sheik Yaki Yamani predicted earlier this week that Saddam would respond to any full-scale U.S. attack by firing at Saudi Arabia and Kuwait, sending oil to $100 a barrel.
"There is a lot of uncertainty, not just about Iraq but the surrounding countries," said Yasser Elguindi, a director at consultants Medley Global Advisers in New York.
WARPLANES ATTACK
The U.S. military said its warplanes attacked an air defense target west of Baghdad in the southern "no-fly" zone on Thursday in response to recent attempts to shoot down planes monitoring the zone.
The no-fly zones were established by the United Nations after the 1991 Gulf War to prevent Saddam attacking inhabitants in those areas.
Bush is set to address the United Nations next Thursday to lay out his case against Iraq, and oil traders said they expected him to deliver an ultimatum to Saddam to open the country to unfettered weapons inspections or face war.
British Foreign Secretary Jack Straw said on Friday that there was a limit to the world's patience with Iraq and that military action had to be an option.
However, Russian President Vladimir Putin told Bush and Blair he doubted there were any grounds for using force against Iraq.
The U.S. army recently moved heavy weapons and supplies from Qatar to Kuwait near Iraq to "test mobility" if Bush ordered preparations for war, the U.S. Army said on Thursday.
TIGHT MARKETS
On top of the Iraq fears, tough output curbs by the OPEC cartel have coincided with a sharp recovery in global demand, which analysts expect to accelerate by the end of the year.
Drollas predicted the Brent price would rise to near $30 a barrel by the end of the year even without an attack on Iraq.
The Organization of the Petroleum Exporting Countries, which controls two-thirds of world exports, meets on September 19 to decide output policy.
Price hawks in the 11-member group including Kuwait and Venezuela have said they want to see current curbs maintained, but analysts believe kingpin Saudi Arabia wants to release more oil onto world markets to avoid price spikes this winter.
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