Algeria stokes oil fears

www.gulf-daily-news.com RIYADH:

Opec will not be able to compensate an expected shortfall of supplies of around five million barrels per day (bpd) in case of war on Iraq, Algerian Oil Minister warned in remarks published yesterday.

Chakib Khelil told the Saudi newspaper Al-Watan that only two Opec members, Saudi Arabia and the UAE, have a real excess production capacity.

"There is a question over Opec capability to supply the market needs because the maximum available (extra) capacity is only three million bpd ... from Saudi Arabia and the UAE," Khelil said.

The shortfall could occur because of a marathon strike in Venezuela and the complete halt of Iraqi production in case of a US attack on Baghdad.

The Opec oil cartel agreed on January 12 to increase oil production by 1.5m bpd in a bid to curb a surge in prices triggered by the strike in Venezuela and the threat of war in Iraq.

This will raise the output ceiling of the Organisation of Petroleum Exporting Countries from 23m bpd to 24.5m bpd, with effect from February 1, 2003.

Khelil said the price hike is being driven by the tense political situation rather than supply and demand mechanism.

The adjusted ceiling will be reviewed at the next Opec ordinary meeting, on March 11.