LONDON, Jan 16: Oil prices surged to their highest level in more than two years here on Tuesday as the risk of war in Iraq appeared to grow after UN chief weapons inspector Hans Blix gave a bleak assessment of the crisis.

The price of benchmark Brent North Sea crude oil for February delivery forged 38 cents higher to $31.60 per barrel in late deals, off an earlier two-year high of $31.80.

In New York, reference light sweet crude February-dated futures, followed up Wednesday’s 84-cent gain by climbing another 51 cents to $33.72 per barrel in early deals.

The jump in prices came as Blix warned bluntly that Iraq must do more to avoid the looming threat of war, calling the situation “very dangerous”.

“The rally is due to the comments that came out regarding the Iraqi situation,” said GNI oil trader Robert Laughlin.

“We just seem to be getting closer to a war that obviously nobody wants,” he added.

Others agreed that Iraq was the primary force behind the latest rally.

“Iraq keeps the market boiling and is still the main fundamental reason for this rally,” said Commerzbank oil analyst David Thomas.

But while Blix also said he was becoming “very impatient,” he at the same time played down the significance of the January 27 target date for him to report to the Security Council.

That date has been seen by some as a crucial date after which the US could attack Iraq, but Blix said he was nearly certain that the Security Council will ask him to produce a new and updated report on Iraq in February.

Analysts said other issues such as the ongoing strike in Venezuela, which is now in its seventh week, and has crippled the country’s exports, along with a cold snap in the United States, were further factors boosting prices.

GNI analyst Lawrence Eagles said that although the overall message of Wednesday’s two US inventory reports was largely neutral, the fact crude stocks have been reduced to near-minimal operating levels was proving to be something of a concern for the markets.

That view was endorsed by Thomas who said that having initially shrugged the figures off, the market appeared to have suddenly focused on the fact crude stocks are now at a 27-year low.

“The worry now is whether they are going to be able to feed the refineries,” Thomas said.—AFP