Global markets face oil glut warns Opec chief

www.gulf-daily-news.com Vol XXV   NO. 319      Sunday      2 February 2003

ABU DHABI: Opec president Abdullah Al Attiyah warned yesterday that world oil markets are in danger of tilting into oversupply during the second quarter and triggering a price crash.

For now, the threat of war in the Middle East, which supplies 40 per cent of world crude exports, and a two-month oil strike in Opec producer Venezuela have pushed prices well beyond $30.

Al Attiyah, also oil minister of Qatar, said war fever had driven up crude prices and he saw Venezuelan output coming back and weighing on already well-supplied global markets.

Asked whether he feared a potential price collapse during the second quarter which typically sees a seasonal demand decline of about two million barrels per day (bpd), he told reporters: "Yes, this is one point we should worry about, assuming the scenario as it is today and, for sure, if Venezuela is coming back." Attiyah, in Abu Dhabi for an Energy and Environment conference, predicted a particularly grim outlook from April if exports in strike-bound Venezuela are fully restored.

"If Venezuela comes back (to full capacity), we could have 4m bpd or more floating," he said, adding that the excess could be at least 3m bpd based on current Venezuelan output.

The Opec chief said output from the South American producer stood now at about 1.4m bpd, up from a low of 150,000 bpd in December.

He reckoned flows could climb in a few weeks to near full capacity of 2.8m bpd.

With that scenario in mind, Al Attiyah said the Opec would have to confront the possibility of either a global surplus or shortage when it meets on March 11 to review output policy.

Given Washington's military preparations in the Gulf, the cartel could find itself gathering around the time of a US strike on Iraq, the world's eighth biggest oil exporter.

Al Attiyah repeated that the producers' group was prepared to cover any supply gap which could develop if a US assault on Iraq disrupted exports there of some 2m bpd.

Opec already has lifted supplies by 1.5m bpd from February 1 to cover the shortfall from Venezuela, but the increase has failed to cool off overheated oil markets.