Oil Prices Fall as U.N. Calls for More Time in Iraq

Oil prices fell on Monday as U.N. Secretary-General Kofi Annan called for more time for weapons inspectors to search Iraq before the United States makes a final decision on going to war.

U.S. light crude (CLc1) slipped 93 cents to $32.25 a barrel and London Brent (LCOc1) dipped 59 cents to $30.05 a barrel.

Chief U.N. weapons inspector Hans Blix on Monday delivered his first full report to the U.N. Security Council on Iraq's cooperation with arms inspectors.

He said: "Iraq appears not to have come to genuine acceptance, not even today, of the disarmament that was demanded of it."

Annan called for more time for the inspections which have been running since late November.

"If they need time, they should be given the time to do their work," Annan told reporters. Arms experts should be given a "reasonable amount of time," he added.

European and Middle Eastern allies are pushing the United States to allow the inspectors more time, possibly until March 1, officials and former policy makers told Reuters at the World Economic Forum in Davos, Switzerland.

"What's driving the timetable for war is not diplomacy but military readiness," said Roger Diwan of consultancny PFC Energy in Washington.

"If the U.S. needs more time to get the military in place it will use that time to seek diplomatic backing but, whether it gets that or not, we still expect war to start some time between the middle of February and early March."

Blix said that documents Iraq submitted in a 12,000-page declaration had not answered questions on the whereabouts of the deadly VX nerve gas, two tons of nutrients or growth media for biological agents, such as anthrax, and 550 artillery shells filled with mustard gas and 6,500 chemical bombs.

And despite assurances from Iraq that it would encourage its scientists to submit to private interviews, no such talks have taken place and Baghdad had blocked the use of U-2 surveillance flights over all parts of Iraq.

At the same time the inspectors had not found evidence of banned activity or production facilities at any of the sites investigated that the United States says exist.

Attention now will turn to President Bush's State of the Union address on Tuesday. Bush is then due to meet key ally Britain's Prime Minister Tony Blair later this week. Britain has sent thousands of troops to join a U.S. military build-up in the Gulf.

The world's biggest oil exporter Saudi Arabia, said at the weekend that it and fellow OPEC members were pumping sufficient volumes to prevent shortages.

Traders fear an attack on Iraq might coincide with the ongoing strike in Venezuela, which has cut exports from the world's fifth-biggest exporter.

"There is no shortage in the market and there should be no reason for prices where they are today," Saudi Oil Minister Ali al-Naimi told a panel at the World Economic Forum in Davos.

"We checked. We called. I checked with individual customers, refineries and others. I ask them one question: Do you feel you need more oil? And the answer is no," he said.

OPEC agreed two weeks ago to raise output by 1.5 million barrels per day to counter some of the shortfall caused by a nationwide strike in Venezuela.

Venezuela's President Hugo Chavez hinted at the weekend that he may be forced to take up arms if he were defeated by the opposition movement, which is calling for Chavez to step down.

Venezuelan crude output has recovered from lows in December and strikers said on Monday production was about 966,000 bpd, 29 percent of pre-strike levels. Chavez claims production has reached 1.32 million bpd.