NEW YORK – Oil prices sizzled near two-year highs Monday and looked set to stay there well into March as a new U.S.-British draft resolution set the stage for war against Iraq.
Forecasts of more cold weather at a time when U.S. fuel supplies are running low sent heating oil futures prices to all time highs and natural gas prices to their 2-year peaks.
U.S. light crude rose 90 cents, or 2.5 percent, to $36.48 a barrel, within sight of 29-month highs above $37 struck last week, and nearing an all-time high of $41.15 hit in the build-up to the 1990-91 Gulf War. Brent crude in Londdeclaring that Baghdad has failed to take advantage of the final opportunity to disarm peacefully.
The United States has said it will disarm Iraq by force if necessary, despite widespread international opposition to war and concern that rising energy costs could smother a weak world economy.
Oil markets fear an attack in Iraq, the world's eighth biggest exporter, may hit supplies from the Middle East, which supplies about 40 percent of globally traded crude.
UK Foreign Secretary Jack Straw said the U.S. and Britain want a U.N. decision on Iraq within about two weeks of submitting the new resolution to the Security Council.
On March 7 chief U.N. weapons inspector Hans Blix will report to the United Nations. U.S. Secretary of State Colin Powell on Sunday said he expected the Security Council to make a judgment soon after the report.
Blix has set a March 1 deadline for Iraq to begin destroying banned al-Samoud missiles and show it is cooperating with demands to rid itself of any biological, chemical and nuclear weapons.
An 11-week oil strike in Venezuela has already run down U.S. stocks of crude oil to their lowest level since 1975, strengthening concern over the impact of any supply disruption in the Middle East.
"We're running on empty," said Gary Ross of New York consultancy PIRA Energy.
Sustained cold weather in the United States has also run down fuel stocks and heating oil futures surged four percent on Monday to hit $1.15 a gallon -- the highest level since NYMEX launched futures trading in 1978.
Temperatures in the U.S. northeast, the world's largest heating oil market are forecast to be below seasonal norms this week. High prices for rival fuel natural gas has further fired up demand for oil.
Traders said tankers were lining up to load vital barrels from Russia, the world's second oil exporter and an emerging supplier to the U.S at Baltic Sea ports.
"The Russians are coming but it won't be here until the end of March," said PIRA's Ross.
U.S. gasoline prices have surged 20 cents in a month to an average of $1.66 a gallon, within a nickel of all-time highs, as prices in some major cities breach the $2 mark.
Pump prices are expected to rise further as supplies tighten ahead of the summer vacation driving season.