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Oil jumps as confidence in swift war end slides

Substantial production closures in Nigeria because of ethnic unrest in the Niger Delta also helped spur prices higher.

U.S. light crude jumped $1.24 to $28.15 a barrel, after a 25 per cent fall over the previous week. London's Brent crude by 1500 GMT was up $1.15 at $25.53 a barrel.

"The oil market has been behaving as if peace has broken out but the level of Iraqi resistance so far suggests the war could drag on with consequences for oil prices," said Adam Sieminski, oil analyst at Deutsche Bank.

"The oil market has become complacent about the war, its risks and the risks of the post-war situation," said Paul Horsnell, oil analyst at JP Morgan.

Last week dealers were optimistic that the war would prove swift after early US and British military gains in the southern Iraqi oilfields and as crude exports from Iraq's Gulf neighbours flowed unhampered.

But over the weekend, Iraq paraded US prisoners of war on television and inflicted its heaviest casualties so far as resistance stiffened the closer US troops draw to Baghdad.

A speech by a defiant Iraqi President Saddam Hussein broadcast yesterday helped boost the buying of oil futures.

Despite resistance, US and British forces tightened their grip at the weekend on Iraq's southern Rumaila oilfields and exporting terminals and began to assess how to restart exports.

Iraq was ranked seventh among crude exporters before the war, exporting about 1.8 million barrels per day (bpd), under UN supervision, from output of 2.5 million bpd.

The northern oil hub of Kirkuk has yet to be secured by US and British forces.

Fears Iraqi soldiers might repeat the sort of damage to oil wells seen in their retreat from Kuwait in 1991 have so far proved unfounded. The U.S. has estimated that fewer than 10 Rumaila wellheads have been sabotaged.

"There could still be some issues in the north or a counter-attack in the south, but the worst case scenarios, such as torching the oilfields, are not playing out," said Raad Alkadiri of PFC Energy in Washington.

Opec exporters, especially Saudi Arabia, have hiked output in the past few months to cool prices that touched a 12-year high of $39.99 for U.S. crude at the end of February.

In Nigeria, oil companies have been sucked into worsening clashes between ethnic groups in the Niger Delta, whose battle for a greater share of the country's oil wealth is turning into a virtual insurrection against the Nigerian state.

Just over 800,000 barrels a day of the 2.2 million barrels daily pumped by Western oil companies in Nigeria has been closed after a series of bloody clashes.