World not on verge of oil crisis: OPEC

www.chinapost.com.tw 2003/1/25 DAVOS, Switzerland, Agencies

The secretary general of the Organization of Petroleum Exporting Countries said on Friday he believed the world was not on the verge of an oil crisis but the threat of a U.S.-led war on Iraq could change that.

"We are in a transitory situation and not on the edge of an oil crisis," Alvaro Silva-Calderon told the World Economic Forum in the Swiss ski resort of Davos.

Asked what would happen to global oil prices if the United States launched military strikes against Iraq, Silva-Calderon said: "We don't know. It's out of our control."

OPEC agreed on Jan. 12 to increase oil production by 1.5 million barrels per day (bpd) in a bid to curb price surges triggered by a strike in Venezuela and the threat of war on Iraq, which has the second biggest known oil reserves in the world after Saudi Arabia.

The move will raise the oil cartel's output to 24.5 million bpd from 23 million bpd starting on Feb. 1. But the promised output hike so far has failed to contain prices, which OPEC aims to keep within a price band of between US$22 and US$28 a barrel.

The price of benchmark Brent North Sea crude oil for March delivery stood at US$29.80 per barrel in midday trading on Tuesday. In New York, light sweet crude March-dated contracts closed down 60 cents at US$31.90 per barrel.

Oil prices could soar further if there is a war in the near term because demand for heating is still high in the wintry northern hemisphere, the chief executive of oil giant Saudi Aramco, Abdallah Jum'ah, told the forum of political and business leaders in Davos.

Former Saudi oil minister Sheikh Ahmad Zaki Yamani said on Tuesday the price of crude could more than triple to 100 dollars a barrel if Iraq set oilfields ablaze in the event of a U.S.-led war.

And Algerian Oil Minister Chakib Khelil warned on Wednesday OPEC would not be able to compensate an expected shortfall of supplies of around five million bpd in case of war on Iraq, because only two of the oil cartel's members °X Saudi Arabia and the United Arab Emirates (UAE) °X had genuine excess production capacity.

Jum'ah told the Davos forum that Saudi Arabia would "continue to have 1.5 to 2 million barrels per day in extra capacity" that it could put on the market "to temper prices."

OPEC has not yet decided whether to take further action to curb prices when it holds its next scheduled meeting on March 11, with the cartel's president saying "all options are open."