War Fears, Unrest in Venezuela Help Drive Up Oil Prices

Crude oil rose above $33 a barrel early today amid concern that the United States may attack Iraq early next year and that a strike in Venezuela looks set to disrupt oil supplies for a fifth week.

The U.S. is increasing its military presence in the Persian Gulf in preparation for a possible attack on Iraq, which President Bush has accused of developing chemical and nuclear weapons.

The U.S. hopes United Nations weapons inspections in Iraq will deliver results by the end of January, Secretary of State Colin Powell said over the weekend.

In Venezuela, the fourth-largest supplier of crude oil to the U.S., strikers including 40,000 oil workers extended an opposition-led walkout to the fifth week, demanding that President Hugo Chavez resign or call elections.

“Iraq and Venezuela remain the two big issues,” said Simon Games-Thomas, an independent energy consultant in Sydney. “It’s concern over whether there’s an early strike against Iraq.”

Crude oil for February delivery rose as much as 45 cents, or 1.4%, to $33.17 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since Dec. 1, 2000, after closing at $32.72 Friday.

At 12:40 p.m. Singapore time, crude was trading at $33.09.

In Venezuela, state oil company Petroleos de Venezuela’s President Ali Rodriguez said the country’s oil output by the end of January will rise to two-thirds of the amount it was producing before the nationwide strike started on Dec. 2.

Output will rise to 2 million barrels a day by the end of January, he said. Rodriguez was appointed by Chavez as head of the state oil company after a failed coup in April.

Traders and analysts said production probably won’t rise to a pre-strike level of about 3 million barrels a day in the next few months as workers will need time to restart pumps and refineries.

“Chavez has announced that Venezuelan oil production will increase to over 2 million barrels per day,” Games-Thomas said. “His previous assessments of production have, however, been both wildly optimistic and inaccurate, so there is a bit of a problem with credibility over this point.”