Oil Prices Rise As Iraqi Wells Set Ablaze

Oil prices jumped this afternoon following TV reports that oil wells in southern Iraq were burning out of control after apparent acts of sabotage.

The market reacted to a report by Fox News, based on information from military personnel in Kuwait, that fires south-west of the city of Basra had been burning for several hours.

The Arab satellite television channel al-Arabiya also said fires had broken out in Iraq's al-Rumeila field, also in the Basra area.

However, neither British nor American officials could confirm the reports. In a Pentagon briefing Donald Rumsfeld said: "We're not on the ground but I have seen indications of reports that the Iraqi regime may have set fire to three or four wells in the south."

On the London exchange, North Sea Brent crude surged to $27.25, up 50 cents a barrel, after hitting an early morning low of $25.53.

The jitters came despite an earlier statement by the Organisation of Petroleum Exporting Countries (Opec), which sought to calm oil markets by announcing that its members had pledged to maximize output to make up for any disruption in crude exports from Iraq.

Opec president Abdullah bin Hamad Al-Attiyah said: "I am herewith reiterating Opec's resolve to make up for any supply shortfall resulting from developing events. To this end, member countries have pledged to use, in the interim, their available excess capacities to ensure continued supply."

Iraqi crude exports, totalling 2m barrels a day, are expected to cease as the war intensifies.

Earlier today, officials from the cartel said that there was no need for such a move as oil prices had dropped to a three-month low. London's benchmark Brent crude oil fell to $25.5 a barrel overnight as traders expected a quick end to the one-sided war.

A week ago, a barrel of Brent crude was trading at $33.70 as stock markets around the world fell sharply on diplomatic wrangling between UN security council members.

Mr Attiyah said that the producer group was keeping in close contact with non-Opec producers and the Paris-based International Energy Agency (IEA), which oversees consumer stocks in 26 industrialised nations.

Iraqi exports ground to a virtual halt this week after the UN evacuated its staff overseeing Baghdad's oil-for-food programme. Saudi Arabia, the world's leading oil exporter, has already raised production well beyond 9m barrels daily - its allowed Opec quota is 8m - in part to cover shortages from strike-hit Venezuela.

The oil cartel has tried to keep prices within a price range of $22 to $28, with varying degrees of success. Opec's big fear is that prices will eventually crash, as they did after the end of the 1991 Gulf war.