BBC Monday, 4 June, 2001, 08:35 GMT 09:35 UK

Oil hits four-month high on Iraqi cuts

The price of oil has risen to a four-month high after Iraq cut exports ahead of the Organisation of Petroleum Exporting Countries (Opec) meeting on Tuesday.

The Iraqi government has confirmed it suspended oil exports indefinately on Monday in protest against a one month extension of the existing "oil-for-food" sanctions regime.

The cut in Iraq's output, which makes up 5% of the world suppy, will put pressure on the11-nation Opec to raise production and head off price rises.

Oil prices rose sharply on Monday, with Brent crude oil for July delivery jumping up $0.43 to $29.50, a four month high, in London before easing back slightly.

"We have to wait and see what's happening," Opec Secretary General Ali Rodriguez told reporters in Vienna ahead of the Opec meeting.

"The effect is on the future market, for the time being the supplies are sufficient for demand," he said.

Sources close to the Iraqi Oil Ministry, speaking on condition of anonymity, said exports through the Iraqi-Turkish pipeline and Iraq's southern al-Bakr oil terminal had ceased.

Opec not worried

Earlier, Opec President Chakib Khelil had said he saw no reason to increase oil production because he did not believe Iraq would stop exports.

Asked what would happen if Iraq did halt exports, Mr Khelil replied: "Of course, we always meet demand in the market... whatever the reason may be."

Iraq produces 3 million barrels a day, 2.2 million of which are exported under the present sanctions rules via official routes.

Since sanctions were imposed on Iraq after the Gulf War in 1991, its output has not been counted as part of Opec's oil quota.

Sanctions tussle

Iraq's actions are in protest against Friday's resolution by the UN Security Council to extend by a month the existing sanctions regime under which Iraq is allowed to export oil in exchange for food and medicines

The UN move is intended to allow Britain and the US more time to persuade other Council members to back their proposals for new sanctions against Baghdad - designed to target the Iraqi Government rather than its people.

Opec had been expected to leave output unchanged.

But Iraq's announcement has put it under pressure to increase production in order to make up the possible shortfall.

The 11-member cartel is responsible for 40% of the world's oil production.

It has so far rejected concerns that oil prices could soar in excess of $35 a barrel like they did last year, sparking fuel protests across Europe.

But some analysts fear price rises are inevitable if Iraq maintains its embargo.

Iraq's oil minister General Amer Mohammed Rashid says Baghdad's oil sales to neighbouring countries will not be affected by the decision, with road tanker deliveries to Jordan and Turkey expected to continue.

-- Anonymous, June 04, 2001