Crude oil futures rose to a 29-month high after British Prime Minister Tony Blair said the discovery that some Iraqi missiles might violate United Nations-imposed range restrictions may accelerate plans by the United States and Britain to go to war against Iraq.
Prices have climbed 35 percent since the end of November partly on concern that war might disrupt exports from the Persian Gulf. Crude oil for March delivery closed up 59 cents at $36.36 a barrel on the New York Mercantile Exchange, the highest since September 2000.
"The anxiety continues to build about a possible Iraqi war," said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. "We are building up to a war when crude oil inventory levels in the U.S. are at 28-year lows and OPEC is already producing close to capacity."
In London, the March Brent crude oil futures contract, which expired today, rose 62 cents, or 1.9 percent, to $33.07 a barrel on the International Petroleum Exchange. The more active April contract traded at $32.45 a barrel.
The rally in New York oil to the highest level in more than two years might lead to even higher prices, analysts said.
"There's resistance in the $36.50 range, but I think that, piercing that, the next resistance level would be $38 to $40" a barrel, said George J. Gaspar, an oil analyst with Robert W. Baird & Co. "We could see a price of $40 to $45 a barrel" increase if there's a war in Iraq, he said.
The Organization of Petroleum Exporting Countries, excluding Iraq, raised production by 560,000 barrels a day in January, to 23.13 million barrels, exceeding its daily target by 130,000, according to a Bloomberg survey. Iraqi production, which accounts for 3 percent of the world's output, rose 190,000 barrels a day to 2.48 million barrels.
OPEC raised output to make up for a loss of shipments from Venezuela because of a two-month strike.