Oil price surges on Cheney warning on Iraq

The price of oil surged in London this morning on comments about Iraq from US Vice President Dick Cheney and doubts over whether…

The price of oil surged in London this morning on comments about Iraq from US Vice President Dick Cheney and doubts over whether the OPEC oil cartel would hike output next month.

Reference Brent North Sea crude oil for October delivery rallied 87 cents to 27.87 dollars a barrel - levels not seen since early April. The London market was closed yesterday for a public holiday.

In New York, the light sweet crude October contract rose 65 cents yesterday to 29.28 dollars a barrel.

Prices climbed after last night’s warning from Mr Cheney that "the risk (sic) of inaction are far greater than the risk of action".

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He argued the world could not wait until it became clear that Iraq had nuclear weapons before trying to topple Saddam Hussein.

Analysts say the prospect of a US-led attack on Iraq has already added a so-called war premium of between three and six dollars to each barrel of crude, and prices could climb even higher.

"Cheney's comments are just another indicator that the US are pretty adamant that they're going to go into Iraq," said Deutsche Bank analyst Mr Jay Saunders.

Traders were also concerned ministers from the Organisation of Petroleum Exporting Countries (OPEC) may shun calls for an increase in oil output when they meet in Japan next month.

"Nobody really wants to be short of crude oil in advance of an OPEC meeting where some of the ministers are saying we need really high prices if we're going to increase quotas and some are saying not at all," said Mr Saunders.

AFP