NEW YORK, (Reuters):
US OIL prices shot to their highest level in two years Monday as a freeze in supplies from strikebound Venezuela and the growing threat of war with Iraq deepened fears of a winter oil s upply shortage.
Prices on the New York Mercantile Exchange jumped US$1.45 a barrel, or five per cent, in regular hours to US$31.75 per barrel. Prices then rose further in afterhours trade to hit a US$32.00 a barrel peak, its highest since January 2001.
Brent crude oil futures in London climbed US$1.38 to US$29.72 a barrel.
Oil prices have risen 60 per cent this year, jumping US$7 in just the last month, heightening concern that higher energy costs could endanger a fragile economy.
New York heating oil prices also surged to two-year highs above 90 cents a gallon on concerns of a shortfall during peak winter demand. Gasoline hit its highest level in 18 months.
Monday's price surge came after the United States and United Kingdom indicated over the weekend that the prospect of a war on Iraq was increasingly likely in early 2003.
A British defence ministry source said the two allies were planning a massive seaborne invasion of Iraq, normally the world's eighth largest oil exporter.
Fears of US-led military conflict rose further after a Pentagon spokesman said a US military unmanned Predator spy plane was presumed lost after being fired on by an Iraqi aircraft in the southern no-fly zone of Iraq.
It was the first downing of a US aircraft in the no-fly zone since a new UN disarmament resolution was passed in November.
A January 27 briefing by UN arms inspectors to the United Nations Security Council is widely seen as the next key date that could trigger an attack.
Iraq exports roughly two million barrels a day of crude oil, and is the sixth largest supplier to the United States.
SUPPLIES CRIPPLED
Oil supplies have already tightened for the Northern Hemi-sphere winter as a 22-day Venezuelan general strike crippled output from the world's Number 5 oil exporter.
Venezuelan President Hugo Chavez said Sunday his government had turned the tide against an opposition strike and was restarting halted oil output and exports, but strikers accused him of lying.
US refinery operations have begun to feel the pinch of the lack of crude oil coming from Venezuela, which normally supplies 14 per cent of US crude and refined product imports.
As supply worries deepen, a senior Republican asked the Bush administration on Monday to release crude oil from the nation's Strategic Petroleum Reserve.
Louisiana Representative Billy Tauzin said in a letter to Energy Secretary Spencer Abraham that two large US refineries will run out of crude oil supplies by the end of the month unless some crude was released from the emergency stockpile.
The OPEC cartel, which pumps about two-thirds of world exports, has sought to contain prices by pledging to fill any supply gap left by the Venezuelan outage or a war on Iraq.
Oil traders fear a war disrupting Iraq exports in conjunction with or in the aftermath of a prolonged Venezuela strike would make it difficult for OPEC to make up the deficit.
OPEC ministers said at the weekend they saw no signs of any real shortage on world markets yet, but most want to partially reverse a recently agreed output curb if prices stay high.
"Shortages, when determined, will be made up. We want to have no imbalances in the market," Saudi Oil Minister Ali al-Naimi told reporters on the sidelines of a meeting of Arab oil ministers in Cairo.
