Opec's secret store revealed

news.independent.co.uk By Leo Lewis 12 January 2003

With the US on a war footing in Iraq, Opec is building an emergency reserve of 150 million barrels of crude oil.

The secret store is the first of its kind to be organised centrally by the 11-member cartel. Its creation is being taken by energy analysts as a sign that Opec is rattled – both by the prospect of war in the Middle East and by the escalating problems in Venezuela, which have pushed the price of oil above $31 a barrel.

The reserves, whose details remain a closely guarded secret, will be spread between about seven of the members and held by the individual countries. Saudi Arabia is understood to be the principal contributor, with Kuwait and Iran both setting aside large volumes. Oil industry insiders believe the reserves would be tapped in the event of a war-related disruption of supplies, but might also be dipped into if the Venezuelan crisis lasts beyond February. Output from the South American country – also an Opec member – is down to about 8 per cent of normal levels.

The topic of Opec's strategic reserve is expected to be under discussion at today's emergency meeting of the organisation in Vienna. The nightmare scenario for Opec is one in which both Iraqi and Venezuelan production go off-line at the same time. Current thinking is that such a situation would trigger use of the strategic reserves held by the US, EU and Japan, but the existence of an Opec-run reserve might avoid that.

Under International Energy Agency rules, countries that consume large quantities of oil are obliged to hold strategic reserves amounting to 90 days' worth of imported product. The Bush administration recently called for its 700 million barrel reserves to be filled to the brim, and other countries are understood to have followed suit. As a net exporter of crude, Britain is not bound by the same rules.