A sharp rally in oil prices gathered pace yesterday as a storm threatening oil output and shipping in the Gulf of Mexico added to uncertainty over the impact of any US-led attack on Iraq.
Dealers ignored evidence of a doubling in Iraqi crude exports last week, focusing instead on reasons why petroleum prices, already 50 per cent up so far this year, should spike further.
"War-mongering and weather-related factors make this look like a runaway train. Stand in front of it at your peril," said Lawrence Eagles of brokers GNI Research.
US benchmark crude oil futures jumped to their highest level since February 2001, leaping 61 cents to $31.32 a barrel.
North Sea Brent climbed 54 cents to $29.67, its highest level since soon after the September 11 attacks last year.
Soaring prices have already hit growth in the industrialised world as it struggles to recover from recession, and dented currencies of big importers such as Japan.
Opec, the oil cartel with big volumes of spare output capacity, has said it will not relax supply quotas because this would not address the root cause of the rally, which is fear of war in Iraq.
Britain released a dossier setting out the case for action against Iraqi President Saddam Hussein yesteray, saying he had the military planning to launch chemical or biological weapons at 45 minutes' notice.
Dealers said the dossier marked another step in the mounting diplomatic offensive against Baghdad, which many believe will end in war on the Arab oil power.
Iraq said the document was baseless. Traders ignored signs that Iraqi exports actually jumped last week after Baghdad suspended an illicit surcharge on its UN-monitored exports, which had driven customers away.
"This move is on the basis of fears of military action against Iraq and other short-term concerns. From a supply point of view the market has to absorb an extra million barrels per day of Iraqi oil," Eagles said.
Traders' attention was captivated by Tropical Storm Isidore, which was poised to regain strength over the Gulf of Mexico yesterday, threatening a region that pumps a quarter of US oil and gas.
The storm has already shut in small volumes of oil and gas output, and forced the evacuation of thousands of non-essential personnel.
High swells from the storm forced the closure of the United States' only deep-water oil port, the Louisiana Offshore Oil Port, on Saturday.
This port is the main conduit for oil imports to the most energy-hungry country on earth, and could further dent crude inventories, which are already below normal.
Opec's reference oil price rose above the group's $22-$28 a barrel target range for the first time since December 2000 on Monday, according to the Opec Secretariat.