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Oil prices up on war fears

LONDON World oil prices rose towards historical highs yesterday as the United States suggested that Iraq may have only days to decide to disarm or face war.

Futures traders fear an attack on the world's eighth largest oil exporter could trigger a supply shock at a time when global inventories are at historical lows.

International benchmark Brent crude oil rose 55 cents to $33.55 per barrel, just 40 cents below a two-year high hit last week. US crude, which hit a 12-year high around $40 last week, was 31 cents higher at $37.00.

"There are certainly a lot of people who think the likelihood of a military operation before the end of March is high," said Adam Sieminski of Deutsche Bank investment bank. US Secretary of State Colin Powell sought to blunt opposition to war by arguing that Iraqi President Saddam Hussein had not made a decision to disarm. "Nothing we have seen... indicates that Saddam Hussein has taken the strategic and political decision to disarm," he said in a speech on Wednesday. "We will see in the next few days whether or not he understands the situation he is in and he makes that choice." Chief United Nations weapons inspector Hans Blix is due to deliver his next report on Friday, and the United States wants the Security Council to vote on a war mandate next week. Powell's harsh assessment of Iraqi cooperation contrasted with comments by Blix, who said Iraq had stepped up disarmament recently. Blix said he would release "benchmarks" for disarmament on Friday, but Powell resisted the idea saying: "We've given him enough measures... I think we can pretty much judge now that he is not complying".