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Iraq's UN-supervised oil exports were at a standstill on Monday and will flow at only a trickle this week as dealers stop buying the crude for fear war is imminent, trading sources said on Monday.
Traders said they were unwilling to take a risk on uncertain supply and that banks were refusing to finance shipments. United Nations oil-for-food inspectors are likely to be evacuated with other UN staff in the next few days, effectively suspending the humanitarian programme.
Most traders said they expect Iraqi oil will not flow normally again until after a war.
Iraq's two authorised export terminals at Ceyhan in Turkey and Mina al-Bakr in the Gulf were both idle on Monday morning. The last vessel at Mina al-Bakr loaded on Sunday, while the last sailing from the Mediterranean port left on Thursday, they said.
Exports at Mina al-Bakr, which can ship over one million barrels per day, are not likely to resume until war ends. The three banks mainly responsible for granting payment guarantees now refuse to back letters of credit.
"Apparently, the banks do not believe there is sufficient time for a ship to load at Mina al-Bakr and get out before the bombs start dropping," said an industry source.
"This effectively means that Basrah Light oil exports have stopped for the time being," he said.
Traders said that, in any case, they now were unwilling to book tankers as they face hefty cancellation penalties from ship owners if exports are cut off.
Exports are expected to be suspended completely once UN inspectors working on the oil-for-food programme are evacuated. The United States has already advised the UN to pull its weapons inspectors out of Iraq.
Iraq can export up to 2.2 million barrels per day from its two terminals, although supplies have run at only around 1.7 million bpd this year due to increased smuggling to Syria and in the Gulf as well as deteriorating infrastructure, dealers say.
The United States, Britain and Spain gave the United Nations a final day to come up with a diplomatic approach to disarming Iraqi President Saddam Hussein, but are expected to press ahead with military action even without a new mandate.
The only two shipments confirmed for this week are from Ceyhan, where the million-barrel Sea Service is scheduled to arrive Monday evening, followed by the 600,000-barrel Caithness on Thursday, a local port source said.
The pipeline that supplies Ceyhan from Iraq was still running on Monday. Significant storage tanks at the port mean a few tankers could keep running even after a supply cut-off.
Despite the stoppage of UN-supervised oil sales, a trade source said it appeared illegal smuggling at the Gulf port of Khor al-Amaya -- adjacent to Mina but not subject to UN monitoring -- was continuing for now.
As much as 10 million barrels may have been smuggled from there in recent months.