DUBAI, Oct 16: A US official held talks on Wednesday with the oil ministers of key producers Saudi Arabia and the United Arab Emirates as Washington continued to prepare for a possible attack against Iraq.

The official UAE news agency WAM said State Department Undersecretary for Economic, Business and Agricultural Affairs Alan Larson discussed the need to maintain sufficient oil supplies and fair oil prices with Oil Minister Obaid al-Nasseri.

“It has been established (during the talks) that there is no current oil supply shortage and that in the event of any shortage for any reason producing nations would take the appropriate steps to cover the needs of the market,” WAM said.

Nasseri and Larson “emphasised the necessity of preserving prices at reasonable and fair levels.”

Fears of a US military attack against Iraq drove prices to 12-month highs of over $30 a barrel in the past few weeks, but prices have retreated slightly since.

Nasseri and other key Opec officials have said that the oil group sought to balance supply and demand and was willing to boost output if there was any supply crunch.

The official Saudi Press Agency reported the meeting between the kingdom’s Oil Minister Ali al-Naimi and Larson without giving any details.

In Washington, a State Department official said the purpose of Larson’s tour, which also includes Jordan “was to review trade and energy issues, build up our already extensive cooperation in combating international terrorist financing.”

Nasseri and Iranian Oil Minister Bijan Zanganeh warned on Sunday of turmoil in global oil markets if the United States decided to strike Iraq.

Zanganeh said a strike could trigger a price collapse, while Nasseri said a war would only increase the present $5 per barrel so-called war premium, leading to market instability.

On Friday, the U.S. Congress granted President George W. Bush authorisation to wage war if necessary to disarm Iraq.

Despite the high prices, top officials at Opec said on Saturday they saw no need now to turn up the taps.

Opec last month decided to keep tight official output limits in place, but the group is producing in excess of two million barrels per day over its production ceiling.

Meanwhile in London oil prices edged higher on Wednesday as the first rise for seven weeks in crude stocks of the world’s largest energy consumer was countered by a drop in heating oil and gasoline stocks.

London Brent crude was 10 cents higher at $28.60 a barrel while US light crude was 13 cents up at $29.85.

Weekly data from industry group American Petroleum Institute (API) released late on Tuesday showed US crude supplies jumped 9.4 million barrels last week, rising for the first time since August.

But the figures also showed big draws in supplies of gasoline and distillate products, including heating oil, a key fuel for the country’s approaching winter season.

Crude inventories were boosted after imports that were delayed due to stormy weather in the Gulf of Mexico and the US Gulf Coast earlier this month finally made their way ashore.

National crude stocks for the week to October 11 stood at 282.7 million barrels, improving from the week before when they hit the lowest levels in more than 25 years, but still 16 million barrels below year-ago levels.

World oil prices are up over 40 per cent from the end of last year, prompted by fears that a war in Iraq could disrupt the country’s 1.5 million barrels a day of exports and eventually strangle oil supplies from elsewhere in the Middle East.

Last weekend’s bombing in Bali has added to worries, though the Indonesian incident had no direct impact on oil trade.—Reuters