Opec 'will prevent shortages'

www.gulf-daily-news.com VIENNA:

Saudi Oil Minister Ali Al Nuaimi said yesterday that Opec (Organisation of Petroleum Exporting Countries) would make sure there were no oil shortages worldwide, amid a strike in Venezuela and the threat of military action in Iraq.

"I can tell you I support making sure the market is well-balanced. There will be no shortage of supply in the market when the market is well-balanced," he told reporters upon arriving in Vienna for a meeting today of the Opec.

He refused to give figures for what is expected to be an increase in oil production in order to bring down prices in a market pressured by a six-week-old strike in Venezuela and the threat of a US-led war against Iraq.

"You will get the figures tomorrow (Sunday)," he said about the extraordinary meeting at its headquarters in Vienna where Opec is expected to increase its official output quota by between one and two million barrels per day (bpd) to help make up the shortfall caused by the general strike in Venezuela, a major supplier to the US.

Venezuela accounts for around 13 per cent of US oil imports. The strike there has caused US oil stocks to fall at a time when Washington needs them to increase as it prepares for a possible war on Iraq.

If the US launches a war in Iraq before the Venezuelan strike ends, markets could be deprived of about five million barrels of crude oil per day, or even more if the war were to destabilise other Middle East producers.

But the size of the increase remains hard to predict, both due to the Venezuela factor and the even greater potential for market destablisation that a possible US-led war in Iraq presents.

"With oil stocks in the US already close to estimated minimum operating levels, Opec has been forced to act," said Washington's Petroleum Finace Company in a weekend briefing to clients.

"The combination of the twin disruption scenarios represents a political nightmare of sorts for Opec, which will be accused of having failed its mission if prices climb above $35 a barrel."

Oil prices in the US recently spiked above $33 for the first time in two years and Washington is worried that sluggish economic growth could be snuffed out by a jump in energy costs.

Opec ministers have to decide exactly how much more crude to pump to contain prices within their preferred $22-$28 target range.