Oil Stays Firm As Mideast Heats Up Reuters Online News - November 23, 2000 08:36 By Sara El-Gammal

LONDON (Reuters) - World oil markets remained strong on Thursday as heightened Middle East tension and a potential disruption in Iraqi oil exports kept prices stubbornly high.

In London, Brent crude oil gained four cents to settle at $33.28 a barrel. Trade was slow, with the New York market closed on Thursday and Friday for the U.S. Thanksgiving holiday. Prices were also underpinned by plunging temperatures sweeping the northeastern United States, where the mercury is running about 10 degrees Fahrenheit below normal for the time of year.

Despite a build in U.S. crude and distillate inventories last week, stockpiles remained well below year-on-year levels, leaving lingering worries over heating oil supplies into the winter.

A car bomb explosion in the northern Israel town of Hadera on Wednesday which killed two people and injured 62 was followed by the shooting dead of four Palestinians in the Gaza Strip back to the Middle East.

Another bomb on Thursday which exploded in one of the joint liaison offices in southern Gaza prompted the Israeli army to order out Palestinians from the facilities in the West Bank and Gaza Strip.

A senior Palestinian official said Palestinians would not leave. An Israeli was killed and two others wounded in the blast as well as two Palestinians.

Around 260 people, mostly Palestinians, have been killed in the violence since September 28.

``Any headlines about violence in the Middle East are going to move (oil prices) to the upside,'' said one IPE oil trader.

Iraq continued to cause concern with a potential disruption to oil supplies looming in early December after the eighth phase of a United Nations sponsored oil-for-food program expires on December 5.

Iraq, which exports a daily average of 2.3 million barrels through the Turkish port of Ceyhan and its Gulf port of Mina al-Bakr, has asked for an extension to January 15.

``A more direct threat to supply security is the issue of Iraqi oil sales,'' said Lawrence Eagles at GNI Research.

Iraq has been sending out contradictory signals to the market, indicating a willingness to allow weapons inspectors back into the country if a formula could be forged that would make Baghdad feel comfortable about letting them in.

But at the same time, it has niggled the United Nations by opening an oil pipeline to Syria without its consent and imposing a surcharge on oil sales from December 1 while demanding payments to be made into a non-U.N. account.

Iraqi crude sale revenues must be made into a U.N. escrow account and Western lifters have said to comply with Baghdad's request would be to violate the sanctions imposed after Iraqi forces invaded Kuwait in 1990.

``While (Iraqi President) Saddam (Hussein) is clearly looking to break down the sanctions regime and making moves that threaten oil supplies over the winter, he has also not disrupted shipments,'' Eagles said.

``In effect he could be saying -- look what I can do but I have not. Now let's talk business about removing sanctions.''

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-- Martin Thompson (mthom1927@aol.com), November 24, 2000