Oil prices bounced higher today as the market focused on Iraqi threats of retaliation against any US-led attack and President Bush prepares for a key speech.
US light crude for March gained 14 cents to $32.70 a barrel after losing 99 cents, or 3 per cent, in New York last night.
The market was less than $3 per barrel below 26-month highs struck last week. Oil has risen some 30 per cent since mid-November on concerns war in Iraq could upset supply from the Middle East while a prolonged strike in Venezuela has curtailed oil production and exports.
Iraqi Deputy Prime Minister Tareq Aziz told Canada's CBC television Iraq might strike at Kuwait to retaliate against any US invasion.
"Kuwait is a battlefield and American troops are in Kuwait and preparing themselves to attack Iraq," he said in an interview in Baghdad. "If there will be an attack from Kuwait I cannot say that we will not retaliate."
A debate within the Venezuelan opposition yesterday over scaling back its two-month strike also kept a rein on oil prices. The country's oil industry has been paralysed by a strike aimed at toppling President Hugo Chavez.
But Venezuelan crude output has recovered from the lows of December and strikers said that production was about 966,000 barrels per day, 29 per cent of pre-strike levels. Mr Chavez claims production has reached 1.32 million barrels a day.