NEW YORK, April 8 (UPI) -- Saddam Hussein's decision to halt Iraq's oil exports for a month as a protest against Israel's incursions into Palestinian territory sparked a rally Monday in world oil markets that was tempered by OPEC's refusal to jump on to Baghdad's saber-rattling bandwagon.
Crude futures gained relatively little ground, but the overall increases were modest as the other oil producing nations refused to announce export cuts of their own.
May crude on the New York Mercantile Exchange settled 33 cents higher on the day at $26.54 per barrel after reaching as high as $27.23 during the busy session.
May crude was up $1.03 at $27.02 per barrel on the International Petroleum Exchange in London, but due to the time differences between London and New York, traders had less time to digest Saddam's announcement.
NYMEX gasoline closed 2.4 cents higher at 84.19 cents per gallon, but the increase was likely due more to continuing labor problems within Venezuela's national oil company than any signals coming from the Middle East.
Although Iraq has some of the largest oil reserves in the world, its exports are restricted by the United Nations. Many analysts believe Baghdad's output of around 2 million barrels per day is too small to have a major impact on world prices unless other major Arab producers make their own export cuts.
"The real issue is, if we get more turmoil in more countries, and if other countries such as Libya and Iran support Iraq," Mary Hutzler, an analyst with the U.S. Energy Information Administration, told reporters. "That's something we are just going to have to keep an eye on."
As the markets closed Monday afternoon, the word from OPEC was that unity was prevailing and no other producers would be making export cuts of their own -- particularly at the behest of an Iraqi dictator who is seen as a major threat to moderate Persian Gulf regimes.
"The threat by Saddam is probably going to do more damage to OPEC than anyone else," Phil Flynn, a crude analyst for Alaron, told CNBC. "Russia and Norway, who have been dying to pump more oil, are more than willing to take up any slack that OPEC is willing to give up."
OPEC production cuts last year caused pump prices in the United States to spike to as much as $2 per gallon in some areas after refiners were caught with low inventories at a time of rising demand. Supplies of both gasoline and crude oil are at higher levels this spring, which gives the United States some cushion against a wider boycott.
Flynn predicted Iraq's actions would create more volatility in the oil markets by making traders more willing to begin buying oil on the basis of news events in the Middle East, but at the same time bringing sellers -- including the producing nations themselves -- into the market faster in order to pounce on price spikes.
"It's dangerous to sell short in this type of environment given the way the news keeps coming across the wire, but in real terms, we have a lot of oil and have built quite a 'war premium,'" Flynn said.
Saddam used a televised speech to address the Iraqi and Palestinian people Monday morning, calling on Arab oil exporting countries to "bless and support" his move and adopt similar measures.
He said Iraq would review its position after 30 days, or when "Israeli forces withdraw from the Palestinian territories they have recently occupied and respect the will of the Palestinian people and their right in sovereignty, security, dignity and life."
Saddam said he had "big hopes that our Arab and Muslim brothers and all faithful will encourage our blessed move and support it with similar steps from the part of the oil owners and other measures by the others, each depending on the chance available to carry out an effective measure."
He said Iraq meant to sound the alarm and let the "voice of the Arab nation be coupled by an effective action," adding that the move was "directed against Israel and the United States and not targeting anyone else."
Thousands of Iraqis took to the streets in Baghdad and other cities in support of Saddam's decision to stop oil pumping.
The demonstrators, mostly students, raised placards praising the Iraqi move and calling on the Arab and Islamic oil-producing countries to take similar measures.
They shouted: "Arab oil is for the Arabs not the foreigners" and expressed support for the steadfast Palestinian people in their confrontation of the Israeli war machine.
Political analysts Monday saw Saddam's move as primarily aimed at building his own reputation as a leader in the Arab states by taking what appeared to be a concrete stand against the Israelis and their U.S. allies.
Concrete results were largely lacking, however, as Israel continued its pressure on the Palestinian Authority and the Bush administration used the Iraqi cuts as ammunition in their campaign to open up Alaska's Arctic National Wildlife Reserve to oil exploration.
(Reported by Hil Anderson, UPI Chief Energy Correspondent and Dalal Saoud in Beirut)