LONDON, March 24: Oil prices raced higher on Monday, bouncing back from a recent drop as news of reverses for US and British forces fighting in Iraq prompted traders to question expectations of a brief war.

The price of benchmark Brent North Sea crude oil for May delivery rose $1.31 to $25.66 per barrel in late trading here.

New York’s benchmark light sweet crude for May delivery climbed $1.34 to $28.25 in early deals, after slumping more than a dollar on Friday.

Traders said the rise was inevitable given that prices had plummeted last week on assumptions that war would be over relatively quickly and simply.

“The one-way traffic seen for various markets last week — the stock markets recovering, gold and oil coming off — was excessive, and there is a general turnaround and oil prices naturally retraced,” said Tony Machacek, a trader with the Prudential Bache group.

“Also, there is a bit of caution regarding how long the war will actually last,” he said.

“Some people might have hoped that we could already be close to some kind of conclusion, but it does appear that the war is going to take some time and won’t just be over in a few days.”

News that Kuwaiti firefighters in southern Iraq had put out their first oil well fire did little to rein in the rally.

Another factor driving prices higher was escalating ethnic unrest in Nigeria.

Oil majors operating in the African country said they had shut down facilities in the Niger Delta which produce about one third the country’s normal oil exports, as ethnic militants threatened to destroy evacuated wells and storage plants.

However, Machacek said that this was having a relatively minor impact for now.

“The market is not focusing on Nigeria, though the news is important, because there are bigger factors influencing the market at the moment,” he said.

“Some people sold heavily on Friday evening on the thought that the war would be over this weekend and the hope that Saddam would be stopped and the market would go down two dollars,” said Barclays Capital analyst Orrin Middleton.

“But this hasn’t happened. This war seems to be lasting longer than expected.”

Nonetheless, prices could soon drop again, he said.

“My guess is that Brent will hold at this level until we get a clearer picture of where the war is going to go,” he said.—AFP